2018 (3) TMI 502 - AT - Service Tax

Business auxiliary services - foreign commission agent - The department was of the view that commission of 1.8% received is subject to levy of service tax - Held that - M/s.Wega has appointed the appellants to provide service of co-ordinating the shipments and for liaison work. M/s.Wega has offered to pay 1.8% of the invoice value as remuneration for the services - Though the amount is paid by the local manufacturers to the appellants, this amount belongs to M/s.Wega as the local manufacturers pays only 3.2% and retain the balance to be paid to appellant - the said amount is out of the purview of taxable services - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of taxable services for commission received in Indian currency, applicability of service tax on commission received, consideration of export of services, relevance of remuneration agreements in determining tax liability.

Analysis:
The case involved the appellants engaged in leather manufacturing, trading, and agency services, registered for providing 'Business Auxiliary Services.' The dispute arose when the department viewed the commission of 1.8% received by the appellants from local manufacturers as subject to service tax. The department issued a Show Cause Notice proposing recovery of service tax, interest, and penalties. The original authority confirmed the demand, interest, but set aside the penalty. In appeal, the Commissioner (Appeals) upheld the decision, leading to the current appeal.

The appellant argued that they did not provide services to the shippers/manufacturers but to M/s. Wega International, a foreign commission agent. They contended that the services provided were for export, not involving taxable services. The appellant highlighted the payment terms agreement between M/s. Wega and themselves, emphasizing that the commission paid by Indian manufacturers was part of the commission owed to M/s. Wega. Therefore, the amount received by the appellants was not taxable.

In response, the Ld. AR reiterated the findings of the impugned order, supporting the department's view on the tax liability of the commission received by the appellants. Upon hearing both sides, the Tribunal examined the agreement between M/s. Wega and the appellants, which clearly outlined the services provided and the remuneration offered. The Tribunal noted that although the amount was paid by local manufacturers to the appellants, it actually belonged to M/s. Wega, as the manufacturers retained a portion to be paid to the appellants. Citing legal precedents, including the Supreme Court decision in J.B. Boda & Co. (P) Ltd. Vs CBDT, the Tribunal concluded that the demand for service tax was unsustainable. Relying on the principles established in previous judgments, the Tribunal set aside the impugned order, allowing the appeal with consequential reliefs, if any.