2017 (10) TMI 349 - AT - Service Tax

Business Auxiliary Service - overriding commission - export of services or not? - levy of service tax - only dispute raised by the department is that such commission was first received by the Indian office of the appellant s client who in turn transferred the amount in Indian rupees to the appellant. - Held that - reliance placed in the case of Arafaath Travels Private Ltd. Versus Commissioner of Service Tax 2017 (8) TMI 554 - CESTAT CHENNAI , where it was held that even if the payment is received in India rupees such retention will have to be necessarily treated as saving of foreign exchange and by implication is akin to receipt of moneys in convertible foreign exchange - In the present case, it is undisputed that the appellants were receiving foreign currency in convertible foreign exchange. In the present case also, there is no dispute that the commission was received from abroad into India in convertible foreign currency - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether overriding commission is subject to levy of service tax.

Analysis:
The appellants, registered under the category of 'Air Travel Agent Service,' were alleged to have received income in the form of overriding commission (ORC), leading to a show cause notice from the Service Tax Department. The original authority confirmed the demand, interest, and imposed penalties under sections 76 and 77 of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision. Subsequently, a notice was issued proposing a review under section 84 to impose penalty under section 78 of the Finance Act, 1994. The Commissioner imposed the penalty, leading to the filing of Appeal No. ST/142/2008 against this revision order. Appeal No. ST/185/2005 was filed against the order of the Commissioner (Appeals) upholding the demand, interest, and penalty.

The pivotal issue of whether overriding commission is subject to service tax was extensively deliberated by the Tribunal in a previous case involving Arafaath Travels Pvt. Ltd. The Tribunal concluded that even if the payment is received in Indian rupees, such retention should be treated as saving of foreign exchange, akin to receiving money in convertible foreign exchange. In the case under consideration, it was established that the appellants were receiving foreign currency in convertible foreign exchange. The dispute raised by the department centered around the commission being initially received by the Indian office of the appellant's client, who then transferred the amount in Indian rupees to the appellant.

In alignment with the Tribunal's decision in the Arafaath Travels case, it was determined that the demand in the present case was not sustainable. Consequently, both impugned orders were set aside, and the appeals were allowed with any consequential relief deemed necessary. The operative portion of the order was pronounced in open court.