2023 (6) TMI 314 - AT - Service Tax

Levy of service tax - Business Auxiliary Service - consulting engineer service received from parent company during the period from April 2008 to March 2009 - reverse charge mechanism - suppression of facts - extended period of limitation - HELD THAT - In similar circumstances when the Indian company procure orders for foreign company, purely on sales commission basis and received sales commission in convertible foreign exchange then for the period after 26.02.2010, this Tribunal has held that the said activity should be treated as export of service - in para 17 of the show-cause notice dated 22.10.2012, it is stated that the respondent has suppressed the information. The said show-cause notice did not elaborate as to which information was required, in which provision of law and how it was suppressed. Therefore, in the circumstances of the case, allegation of suppression is totally presumptive. The extended period can be invoked if there is suppression with an intention to evade duty. Revenue has not established as to how there was intention to evade duty. Till the pronouncement of Final Order on 17.05.2019 it was debatable as to whether prior to 26.02.2010 under similar circumstances service tax was payable. Therefore, before 17.05.2019 if the respondent did not pay service tax till 26.02.2010 under similar circumstances it cannot be established that there was intention to evade duty. Therefore, this was not a case for invocation of provisions for extension of limitation period - the show-cause notice was issued on 22.10.2012 and during the relevant period, normal period for raising the demand was 18 months. Therefore, the demand for the period after 22.04.2012 would have been for normal period. The period before 26.06.2010 in the present proceedings is barred by limitation, therefore, Revenue has no case in the present circumstances to demand duty under the Business Auxiliary Service. The impugned order upheld - appeal filed by Revenue dismissed.

Summary

Issues Involved:
1. Demand of service tax on consulting engineer services under reverse charge mechanism.
2. Demand of service tax on sales commission received for booking purchase orders.

Summary:
Issue 1: The respondent, a subsidiary of a German company, received consulting engineer services from the parent company but did not pay service tax under reverse charge mechanism. The Revenue issued a show cause notice demanding service tax for the period from 2007-08 to 2011-12. The original authority confirmed the demand on consulting services and imposed a penalty, which was accepted by the respondent. The Revenue appealed against the dropping of the demand of Rs. 1,16,34,208/-.

Issue 2: The Revenue contended that the sales commission received by the respondent for procuring purchase orders for the parent company constituted Business Auxiliary Service and service tax was payable on the same. The respondent argued that their role was limited to booking purchase orders, and the commission received in convertible foreign exchange was for services provided to the parent company in Germany, constituting export of service.

Judgment: The Tribunal noted that for similar circumstances after 26.02.2010, the activity of procuring orders for a foreign company on a sales commission basis and receiving commission in foreign exchange was considered export of service. The Tribunal found the allegation of suppression by the respondent to be presumptive, as the show cause notice did not specify the information suppressed. It was held that the extended period for raising the demand could not be invoked without establishing an intention to evade duty. The Tribunal also clarified that for the period before 26.06.2010, the demand was barred by limitation, and the Revenue had no case to demand duty under Business Auxiliary Service. Consequently, the impugned order was upheld, and the appeal by the Revenue was dismissed.