The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand and observed that mere use of commission in clause of payment doesnot mean commission was paid by seller.
The show cause notices alleged that the respondents, M/s. Sidh Designers Pvt. Ltd, who are engaged in the business of export of readymade garments, had availed the services of foreign based commission agents in Dubai who procured orders for the respondents and ensured payments after deducting their commissions @ 12.5%, which is also reflected in the export invoices and shipping bills. The said services, it was alleged in the show cause notices provided by the foreign commission agents to the respondents, would be classifiable under Business Auxiliary Services (BAS).
It was further stated that the buyers performed some activities with regard to the export of goods in the foreign country in terms of the agreement entered into between the parties and the expenses incurred by the said buyers were reimbursed by the respondents, which expenses have been incorrectly termed as commission in the show cause notices.
The counsel for the respondent submitted that doubts raised by the Department to the authenticity of the contracts submitted by the respondents before the adjudicating authority are based merely on presumptions and the said contracts cannot be ignored merely because they were not produced during the investigation.
The counsel also pointed out that the Commissioner committed no illegality in placing reliance upon the retraction made by Sahdev Gupta immediately on the next day the statement was recorded.
A Two-Member Bench of the Tribunal comprising observed that “Mere use of the word „commission‟ in the clause dealing with terms of payment would, in view of the aforesaid decisions, not mean that „commission‟ was paid by the seller. There is no third person who can be said to be acting an agent and the goods were undoubtedly sold on a principal to principal basis.”
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