The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench comprising of Sulekha Beevi CS, Judicial Member and Vasa Seshagiri Rao, Technical Member quashed order confirming demand for extended period after holding no suppression of facts.
The appellants, M/s. Sara Leather Industries, are engaged in the manufacture of export of leather footwear uppers and export the same to various foreign countries. During the course of verification of records, it was found that the appellants were availing the services of foreign agents for procurement of orders. The appellant paid commission to the foreign agents in foreign currency for such services.
In terms of rule 2(1)(d)(iv) of the Service Tax Rules, 1994 (STR,1994), the appellant was liable to pay service tax on the commission paid to foreign agents. The appellant neither registered themselves under Business Auxiliary Services (BAS) nor paid service tax on the commission paid to foreign agents. A Show Cause Notice was issued demanding service tax on the commission paid to foreign agents during the period 09.07.2004 to 30.09.2007.
After due process of law, the adjudicating authority confirmed the demand along with interest. The proposal in the SCN to impose penalty was dropped. Aggrieved by the confirmation of demand, the appellant is before the Tribunal.
N. Viswanathan appeared and argued for the appellant and argued that since service tax is a destination based tax and as the entire service is provided by the commission agents located in foreign countries and being consumed outside India without which the export of goods is not possible, such activity will not come within the purview of BAS as defined under Section 65 (90) of the Finance Act, 1994.
The Counsel also contended that the Commissioner has observed that there was no suppression of facts and that appellant had not paid the service tax on a bonafide belief that such commission paid to the foreign agents is not subject to levy of service tax. However, the demand for the period after 18.04.2006 has been confirmed which is contrary to the discussions and findings
The Tribunal observed that “Although the Commissioner had rendered a finding that there is no suppression of facts with intend to evade payment of tax, the demand for the extended period has been confirmed. We find that such confirmation of demand is not legal and proper and requires to be set aside.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
