2013 (11) TMI 1010 - HC - Service Tax

Appellate Tribunal grants exemption on service tax for export agency commission & corporate guarantee, High Court upholds waiver.

M/s OLAM AGRO INDIA LIMITED Versus COMMISSIONER OF CENTRAL EXCISE

The Customs, Excise and Service Tax Appellate Tribunal directed the appellant to deposit service tax on agency commission for export of agricultural ... Waiver of pre-deposit - CESTAT directed the appellant to deposit entire service tax along with proportionate interest - corporate guarantee commission paid by the appellant to the foreign principal - held that:- it is clear that the tribunal has observed that they were persuaded to follow the interim order passed in the case of Kaveri Agri Care Pvt. Ltd. [2010 (11) TMI 153 - CESTAT, BANGALORE] - In spite of the said observations and findings, the tribunal in the last paragraph directed the appellant to make pre-deposit - In view of the findings recorded by the tribunal reproduced above, we feel that the appellant is entitled to complete waiver of pre-deposit. The question of law is accordingly answered. - full stay granted. Issues involved:1. Whether Customs, Excise and Service Tax Appellate Tribunal was correct in directing the appellant to deposit entire service tax along with proportionate interest within six weeks from the date of the order despite earlier findingsRs.Analysis:Issue 1: Service Tax on Agency Commission for Export of Agricultural ProduceThe appellant sought waiver of pre-deposit for their appeal against adjudication orders related to agency commission remitted to the parent company for facilitating export of agricultural produce. The tribunal found that the adjudication order erred in denying the benefit of exemption under specific notifications. It was observed that the overseas agents facilitating the export of agricultural commodities fell within the scope of commission agents as defined in the notifications. The tribunal concluded that the commission paid for export facilitation of agricultural produce was entitled to exemption under the relevant notifications. Consequently, the appellant was granted exemption/waiver of pre-deposit based on the prima facie opinion in their favor.Issue 2: Corporate Guarantee CommissionThe second issue involved corporate guarantee commission paid by the appellant to the foreign principal. The tribunal considered this commission payment as a service provided for facilitating business activities related to procurement of agricultural produce for export. While initially forming a prima facie view on the nature of this service, the tribunal referred to an interim order in another case regarding corporate guarantees provided to a bank. Despite this reference and acknowledging the persuasive value of the interim order, the tribunal directed the appellant to deposit a specific amount along with proportionate interest within six weeks, failing which the appeals would be dismissed for non-compliance. However, the tribunal's own observations indicated that the provision of corporate guarantee fell outside banking or financial services, suggesting a possible exemption from service tax liability.In conclusion, the High Court answered the substantial question of law in favor of the appellant, granting complete waiver of pre-deposit based on the findings and observations made by the tribunal.