Tribunal rules commission on foreign goods sold in India not taxable under Service Tax

The Tribunal allowed the appeal, ruling in favor of the appellant, who was marketing goods for foreign clients in India and receiving commission for obtaining orders. The Tribunal found that the commission, received in convertible foreign exchange, constituted an export of service and was not liable for Service Tax. It noted that the Revenue's show cause notice failed to establish that the commission was received in INR, rendering it unsustainable. The appellant was granted relief as per law.

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Issues: Liability of Service Tax on commission received for obtaining orders for foreign clients.

Analysis:
The appeal was directed against an Order-in-Appeal passed by the Commissioner (Appeals) regarding the liability of Service Tax on the commission received for obtaining orders for foreign clients. The appellants were marketing goods of foreign clients in India, receiving commission, and providing after-sales services. The dispute centered around the classification of the commission under Business Auxiliary Services and its liability for Service Tax. The Revenue issued a show cause notice contending that the commission received during the financial year should be subject to Service Tax. The Original Authority confirmed the demand and imposed a penalty, leading to the appeal before the Commissioner (Appeals).

Before the Commissioner (Appeals), the appellant argued that the commission was received in convertible foreign exchange, constituting an export of service and thus not liable for Service Tax. However, the Commissioner (Appeals rejected this argument, upholding the Order-in-Original confirming the demand and penalty. The appellant then appealed to the Tribunal.

During the hearing, the appellant submitted evidence, including a letter dated 25.09.2009, stating that the service provided was not liable to Service Tax as it amounted to an export of service. The appellant also presented documentary evidence establishing the realization of convertible foreign exchange. The Revenue supported the impugned Order-in-Appeal.

After considering the contentions and perusing the records, the Tribunal noted that the show cause notice selectively used information from the appellant's letter dated 25.09.2009 to frame charges, ignoring crucial parts. The appellant had stated in the letter that they were providing services to foreign clients, constituting an export of service. The Tribunal found the show cause notice unsustainable as it failed to establish that the commission received was in INR. Consequently, the appeal was allowed, and the appellant was entitled to any consequential relief as per law.

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