2016 (10) TMI 242 - AT - Service Tax

Commission paid to overseas agent - reverse charge - Benefit of Notification No. 18/2009-ST dated 07.07.2009 - Whether in the facts and circumstances of the case, the demand of service tax is correct under the reverse charge mechanism from the appellant by denying the benefit of Notification No. 18/2009-ST on account of technically lapses - Business Auxiliary Service. Held that - the appellant is receiving service of overseas commission agent and paying commission to the said agent. The benefit of notification has been denied due to reason that the appellant has not produce BRC and have not filed original copy of invoices and the return form the EXP-1 and EXP-2. In fact, the basic of requirement of notification has not been disputed by the Revenue, therefore, substantive benefit cannot be denied on account of technical lapses has held by the Hon ble High Court of Bombay in the case of Union of India Vs. Farheen Texturisers (2010 (7) TMI 982 - BOMBAY HIGH COURT). Further by the Hon ble High Court of Allahabad in the case of J.S. Gupta & Sons (2015 (7) TMI 379 - ALLAHABAD HIGH COURT) the payment made to the overseas commission agent not in disputed. The appellant has filed all the shipping bills and copy of invoices issued by the overseas agent. These fact has not been disputed by the Revenue. In that circumstance, I hold that the appellant has complied with the condition of the notification. Further, I observed that the commission paid to the overseas commission agent is less than 1% of the FOB value of the exported goods. Therefore, the appellant is entitled for benefit under Notification No. 18/2009-ST. Consequently, no service tax can be demanded under the category of Business Auxiliary Services under reverse charge mechanism. Chargeability - Service tax - Whether the activity of loading/unloading by the contractor is chargeable to service tax under the category of Manpower Recruitment Agency Services or not - Held that - the demand of service tax has been confirmed under the category of Manpower Recruitment Agency service for loading goods by the contractor on weight basis. As contractor has entered into agreement with the appellant on weighment basis. In that circumstances, the activity of loading/unloading cannot be termed as supply of Manpower Recruitment Agency Service therefore, the demand under such category is not sustainable. - Decided in favour of appellant

Summary

Issues:
1. Denial of benefit under Notification No. 18/2009-ST for service tax on commission paid to overseas commission agent.
2. Demand of service tax under the category of Manpower Recruitment Agency service.

Analysis:
Issue A: The appellant contested the denial of the benefit under Notification No. 18/2009-ST for service tax on commission paid to an overseas commission agent. The appellant argued that technical lapses should not lead to the denial of the substantial benefit, citing relevant case law. The appellant had received services from the overseas commission agent and made payments, meeting the basic requirements of the notification. The appellant submitted shipping bills and invoices as required, which were not disputed by the Revenue. The Commissioner's payment to the overseas agent was within the permissible limit of 1% of the FOB value of exported goods. Consequently, the appellant was deemed entitled to the benefit under the notification, and no service tax could be demanded under the reverse charge mechanism for Business Auxiliary Services.

Issue B: The demand of service tax under the category of Manpower Recruitment Agency service for loading goods was challenged by the appellant. The appellant argued that the contractor was paid based on the work done, not the labor provided, as per the agreement on a weight basis. Therefore, the activity of loading/unloading could not be classified as a supply of Manpower Recruitment Agency Service. The Tribunal concurred with this argument, ruling that the demand under the said category was not sustainable.

In conclusion, the Tribunal found merit in the appellant's arguments and set aside the impugned orders, allowing the appeals with any consequential relief. The judgment emphasized the importance of meeting substantive requirements over technical lapses in availing benefits under the relevant notification.