The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)has held that no service tax leviable on commission is received from overseas entities as consideration for Business Auxiliary Services (BAS) as they are export of service.
M/s Carrier Airconditioning Refrigeration, the appellant is a wholly owned subsidiary of Carrier Corporation, USA and is engaged in manufacturing, selling and distributing various types of airconditioning and refrigeration equipment.
The appellant received queries from various customers for products that are not manufactured by the appellant but are manufactured by other overseas entities of the Carrier group outside India. The appellant forwarded such enquiries to the overseas entities of the Carrier Group.
After such queries are passed on to the overseas entities, they enter into negotiations with the customers in terms of product delivery, price terms etc. and if the deal between the overseas entities and the Indian customers are materialized, the overseas entity enters into a contract with the customer directly and the invoice is also raised by the overseas entity on the customer directly and the goods were imported directly by the customers but for such transactions, the appellant is given some commission as a percentage of the value of the imports which was received in convertible foreign currency.
On audit,it was observed that the Appellant was receiving commission payments from overseas entities as a consideration for providing Business Auxiliary Services (“BAS”) under Section 65(19)(iv) of the Finance Act and was not discharging service tax on the same by treating them as export of services. AnSCN was issued proposing the demand on the ground that the BAS services rendered by the Appellant do not qualify as export of services as the same are being used by Indian customers in India.
After due process, the Commissioner adjudicated all four show cause notices with the impugned order and confirmed the demand alongwith interest under Section 75 of the Finance Act, 1994 and also imposed various penalties
After considering the submission of both the parties and perusal of material on record and the various decisions relied upon by the appellant. The reasoning adopted by the department is that the services of the commission agent were used in India to cater to the Indian markets.
The Circular dated 24.02.2009 also categorically states that for the services to fall under rule 3(1)(iii) of the 2005 Export Rules, the relevant factor is the location of the service receiver. In other words, the place of performance of the service or the place where the customers of the service receiver are located is irrelevant.
The Bombay High Court in the case of Commissioner of Service Tax-VII vs. Life Care Medical Systems 2018 after relying upon its earlier judgement in the case of A.T.E Enterprises Pvt. Ltd. cited has held that “where services were rendered in India to a foreign party, then such service is not liable to tax as it would be export of service. It clarified the word ‘outside India’ to mean that the benefit should accrue outside India.”
By following the ratios of the above-said decisions, Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) viewed that the impugned order is not sustainable in law and therefore set aside the same by allowing the appeal of the appellant with consequential relief.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
