2015 (1) TMI 227 - AT - Service Tax

Business Auxiliary Service - Commission Agent service - Held that - Invoice clearly shows that VAT liability has been discharged which indicates the sales of wire harness by Tyco Electronics Corporation India (P) Ltd. to the appellants. The appellant has also issued an export invoice to the foreign buyer and has realised the export proceeds. These documents on records clearly evidence that the transaction involved is one of purchase and sale of goods by the appellant on a principal-to-principal basis and not as an agent of anybody else. Following the decision of this Tribunal in the case of Pratap Singh & Sons cited 2006 (12) TMI 13 - CESTAT,MUMBAI , we set aside the impugned order - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant is liable to pay Service Tax under the category of "Business Auxiliary Service" for marking up the price of goods sold to a foreign entity.
2. Whether the appellant acted as a Commission agent for the Indian seller based on the mark up shown as commission income in their books of accounts.

Analysis:

Issue 1:
The appellant marked up the price of goods purchased from an Indian seller and sold to a foreign entity, which led to a Service Tax liability under "Business Auxiliary Service." The Revenue alleged that the mark up shown as commission income in the appellant's books indicated their role as a Commission agent. However, the appellant argued that they were exporters who directly sold the goods to the foreign entity, and the mark up reflected in their accounts was a mistake. The Tribunal examined the purchase and sale invoices, which confirmed the appellant's role as a principal seller to the foreign entity. Relying on a previous Tribunal decision, the Tribunal held that the transaction was a sale of goods on a principal-to-principal basis, not warranting Service Tax under "Business Auxiliary Service." Consequently, the impugned order was set aside, and the appeal was allowed.

Issue 2:
The Revenue contended that the mark up shown as commission income in the appellant's balance sheet supported the claim that they acted as a Commission agent for the Indian seller. The appellant refuted this by emphasizing that they were exporters who directly billed and received proceeds from the foreign entity. They argued that the mere accounting treatment of the mark up as commission income did not establish their role as a Commission agent. Citing a precedent where a similar mark up did not attract Service Tax liability, the appellant sought relief. The Tribunal, after reviewing the documents and submissions, agreed with the appellant's position that the transaction was a sale of goods, not involving Commission agency. Therefore, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the transaction involved the sale of goods on a principal-to-principal basis, negating the liability for Service Tax under "Business Auxiliary Service." The Tribunal emphasized the importance of examining the nature of the transaction and the supporting documents to determine the appropriate tax treatment, rather than solely relying on the accounting treatment of the mark up.