Extended Time Proviso not Invokable on Sales Commission to Overseas Commission Agent under RCM: CESTAT quashes Service Tax Demand [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand and noted that the extended time proviso not invokable on sales commission to overseas commission agent under Reverse Charge Mechanism (RCM).

The appellant in the present matter is Messrs Aarvee Denims & Exports Ltd.

The department initiated an inquiry and came to know that the appellant had appointed some agents in foreign countries for promotion, marketing and sale of their goods in foreign countries on payment of brokerage /commission. The department formed a view that the appellant has been receiving service of foreign agents for which they have not discharged the service tax liability as per the provision of the Finance Act, 1994.

The department contended that as per the provisions of section 66 A of the Finance Act, 1994 read with Section 65 (19) of the Finance Act, 1994 and Section 65 (105) (zzb) of the said act with regard to the Business Auxiliary Service, the appellant should have paid service tax on the services received by him from the persons based outside India.

The Advocate for the appellant put forward his point of view that extended time proviso under Section 73 of the Finance Act, 1994 cannot be invoked in their case as the element of suppression of fact, fraud or mis- declaration with intent to evade service tax are not present. It was also submitted that at the relevant point of time the appellant was eligible to avail cenvat credit of the tax paid under reverse charge mechanism and therefore the issue is primarily revenue neutral.

A Single Bench of CL Mahar, Technical Member concluded by observing that “I follow the decision of this Tribunal in the case of M/s. Marck Bioscience Ltd where under it has been held that in case of sales commission to overseas commission agent under reverse charge mechanism, the extended time proviso is not invokable.”

To Read the full text of the Order CLICK HERE

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