Relief to Rolex: CESTAT sets aside demand of Service Tax on Commission by Foreign Agent [Read Order]

As a relief to Rolex Rings, the Ahmedabad bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) set aside the demand for service tax on commission by foreign agents. M/s. Rolex Rings Pvt. Ltd. challenged the Order-in-Appeal of Commissioner (Appeals) of Central Excise & Service Tax, Rajkot which has confirmed the demand of Service tax of Rs. 34,09,301/-, interest thereon, and penalties under Sections 76, 77 and 78 of Finance Act, 1994. The appellant was registered with the Service Tax Department under various categories of taxable services. After the audit of their accounts by the officers of the Department, the Revenue entertained a view that the appellant/assessee did not discharge the service tax liability on the commission amount paid to the foreign Commission agent. The commission paid to the foreign agent is taxable and falls under the purview of “Business Auxiliary Services” as defined under Section 65(19) of the Finance Act, 1994. The definition of the person liable for paying service tax is given in Rule 2(1)(d)(iv) of the Service Tax Rules 1994. as “about any taxable service provided or to be provided by any person from a country other than India and received by any person in India under Section 66A of the Act, the recipient of such service”. The Appellant was issued a show cause notice for demanding service tax amount along with interest and penalty which was confirmed vide OIO dtd. 30.11.2011. On appeal, the Commissioner (Appeals) upheld the order. The appellant contended that Commissioner (Appeals) has erred in confirming the demand for Service tax because the service is exempt from payment of service tax under Notification No. 41/2007 and/ or Notification No. 18/2009 and therefore no part of service tax was liable to be confirmed. Further stated that the CIT(A) failed to consider the fact that the Service tax so demanded was otherwise available as credit and there cannot be any intention to evade the payment of tax and consequently the allegation of suppression of fact was not sustainable He further submits that in the impugned matter Appellant has paid the service tax along with interest before the issue of show cause notice, in terms of the provisions of Section 73(3) of the Act, therefore the show cause notice itself could not have been issued. A Coram comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) viewed that, as no intention to contravene the provisions of the Finance Act, 1994 and of the rules made thereunder can be attributed to the appellant for the reason that even if they are required to pay Service Tax on the disputed service, in question, provided by the foreign agent, the entire Service Tax paid under RCM would be immediately available to them as Cenvat Credit and collection of Service Tax from the appellant would be a revenue-neutral exercise. The Tribunal observed that in the case of Jay Yushin Ltd., it was held that in such circumstances where revenue neutral situation comes about about the credit available to the assessee himself of the duty paid by him and not by the way of the availability of credit to the buyer of the assessee‟s manufactured goods, the longer limitation period under proviso to Section 11A(1) of Central Excise Act, 1944 would not be applicable. While allowing the appeal, the Tribunal set aside the order as the demand is barred by limitation and the penalty under Finance Act, 1994 also would not be attracted. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Relief to Rolex: CESTAT sets aside demand of Service Tax on Commission by Foreign Agent [Read Order]

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