Deduction in Sale Invoice cannot be Treated as Commission for purpose of Levy of Service Tax under ‘Business Auxiliary Service’: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the deduction in the sale invoices cannot be treated as the commission. The Court also held that the commission was not subjected to the levy of the service tax under the business auxiliary services. 

J.B Exports, the appellant assessee are engaged in the export of goods to foreign buyers and while raising the invoices in the sale invoice the assessee had deducted 10%/12.5% as commission and after deduction of the said commission the amount was realized against the export proceeds. 

The original authority confirmed the demand for service tax for commission paid to the foreign buyer by the assessee and also demanded the service tax on the Goods Transport Agency(GTA) services provided by the assessee. 

H.D. Dave, the counsel for the assessee contended that merely by mention of commission or any other term, whereby the deduction was given in the sale invoice, the same cannot be treated as Commission for levy of Service Tax under ‘business Auxiliary Service and the demand of service tax on the commission shall not be sustained. 

Tara Prakash, the counsel for the department relied on the decisions made by the lower authorities and contended that since the deduction from the invoice value was made in the nomenclature of commission and it was a commission paid to the foreign buyer and which was chargeable to Service Tax as commission agent service under ‘Business Auxiliary Service’. 

The Bench observed that the entire fact about the commission being shown deduction in the sales invoice was very much in the knowledge of the department and the assessee being registered manufacturer with Central Excise had filed their regular return to the department, there was no suppression of facts of mis-declaration on the part of the assessee. 

The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that the commission received by the assessee was not subjected to levy of the service tax while allowing the appeal filed by the assessee. 

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