Documents showing Commissions Paid to Foreign Agents for Exporting Goods not Submitted on time: CESTAT Denies Service Tax Exemption [Read Order]

The Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) denied the appeal by N. M. Zackriah & Co. (the Appellant) for exemption of service tax for the payments made to foreign agents for exporting goods, against the order issued by the Commissioner of Service Tax (CST), Chennai (the respondent) as the documents showing the commissions paid to the foreign agents was not submitted on time.

N. M Zackriah & Co. exported Full Shoes and Shoe Uppers falling under TSH 64 of the Central Excise Tariff Act, 1985 and has filed for service tax exemption. They had claimed exemption for 52 shipping bills, out of which details relating 51 shipping bills was submitted late and have not complied with the condition for availing the exemption; original documents relating to the actual payment of commission along with a copy of the contract should be enclosed, and thus the CST issued the impugned order.

The appeal against the impugned order was rejected by both of the adjudicating authority.

The counsel that appeared on behalf of N. M Zackriah & Co. contended that they had used foreign commission agents and when the impugned order was issued they had submitted all the details but the original documents showing the payment of commission to the agent could not be produced as the commission was to be paid only after realization of sale proceeds from their buyers, which would take 2-3 months from the date of export clearance. Therefore the exemption could only be claimed after the payment of commission to the agent.

The counsel that appeared on behalf befall of the revenue reiterated the findings in the impugned order.

The two-member bench consisting of P.Dinesha (Judicial Member) and M.AJit  Kumar (Technical Member) upheld the judgment by the Commissioner(Appeals) as N.M Zackriah&Co. had not produced shipping bills, agreement/contract with the agent and the original documents showing the actual payment of commission to the agent.

The bench further mentioned the judgment of the Hon’ble Supreme Court in the case of “Commissoner of Customs (Import), Mumbai v. Dilip Kumar& Company”; “Exemption notifications should be construed strictly, that is to say the appellant should strictly adhere to the conditions specified under such exemption Notification” and dismissed the appeal

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