The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the commission to agents cannot be subject to service tax in the absence of service provider and the consideration.
The appellants are merchant exporter and engaged in export of textiles goods such as fabrics, scarves, sarees, dress materials etc. to various countries. During the course of scrutiny of Shipping bills, it is revealed that Appellant have shown the commission amount to the tune ranging from 11% to 12% paid to commission agent located outside the India. From the scrutiny of their export invoices, it is revealed that they were deducting the said commission amount from the gross value of their export goods to arrive the net value of export.
The department was of the view that the said commission shown in the shipping bills/ export invoices is nothing but commission paid to the commission agent towards export of goods, therefore said commission amount is chargeable to service tax under the head “Business Auxiliary Service.”
The bench comprising Mr. Ramesh Nair (Judicial Member) and Mr. Raju (Technical Member) observed that there is no commission agent exist who provided the service for export trading of the goods exported by the appellant.
“When no service provider is in existence it cannot be said that the appellant have received the commission agent service. Secondly, it is also fact that the appellant have not paid the commission to any person in the foreign country. Therefore, in absence of any consideration paid for the alleged commission agent services no service tax can be demanded. In the export invoice the appellant have deducted an amount in the nomenclature of commission from the gross sale price thus, the deduction was passed on to the buyer of export goods which is nothing but a discount given to the Foreign Buyers of the goods,” the bench said.
Quashing the demand order, the Tribunal held that “In the above facts we are of the view that neither any service provider exist nor was any consideration paid to any service provider. Therefore, the department’s contention is baseless and not sustainable. We find that the appellant without prejudice also argued that if at all it is considered as the service of commission agent since the same was used for export of goods then also it is not chargeable for service tax as per notification no.14/2004-ST 10.09.2004 and in support of the submission they relied upon the judgment in the case of Textyard International – 2015 (44) GSTL 284 (T) and Arvind A. Traders – 2016 (44) STR 264 (T). Though we find force in this submission also made by the appellant but since on the first issue itself we had decided the matter, we are not inclined to give finding on alternate submission discussed above.”
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