2018 (8) TMI 819 - AT - Service Tax

Appellant wins service tax case under reverse charge exemption, benefiting from overseas agent commission rule.

The Tribunal ruled in favor of the appellant, setting aside the demand for service tax under reverse charge. The appellant qualified for exemption under ... Business Auxiliary Service rendered towards textile processing - N/N. 14/2004-ST dt. 10.09.2004 - suppression of facts - time limitation - penalty - Held that:- The issue in dispute has been decided in favour of the appellant in a slew of Tribunal orders of the CESTAT Chennai - reliance placed in the case of TEXYARD INTERNATIONAL, SREE ANGALAMMAN EXPORTS, ATLAS EXPORT ENTERPRISES, M/S KANGAROO IMPEX VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [2015 (8) TMI 794 - CESTAT CHENNAI], where it was held that Service tax if any payable under reverse charge is permissible to be availed as cenvat credit and that may be refundable under Notification No.41/2007 unless otherwise deniable by law. The provision made in Central Excise Rules and Cenvat Credit Rules ensures that tax is not added to the cost of export so that Indian exporter can compete with overseas market. Appeal allowed - decided in favor of appellant. Issues Involved:1. Demand of service tax on commission paid to overseas agents for procurement of orders.2. Applicability of Notification No.14/2004-ST for exemption from service tax.3. Limitation period for the proceedings.4. Imposition of penalties under Section 77 & 78 of the Finance Act, 1994.Issue 1: Demand of service tax on commission paid to overseas agents for procurement of orders:The appellant, a manufacturer of textile made-ups, availed the services of overseas commission agents for order procurement, leading to a demand for service tax. The original authority confirmed a demand with interest and penalties under Section 77 & 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld this order, prompting the appellant to appeal the decision.Issue 2: Applicability of Notification No.14/2004-ST for exemption from service tax:The appellant argued that Business Auxiliary Service rendered towards textile processing is exempt from service tax as per Notification No.14/2004-ST. They highlighted previous decisions by CESTAT Chennai in their favor, emphasizing that the services provided fall under the exemption criteria. The Tribunal examined the notification and concluded that the appellant, being a textile manufacturer and exporter, qualifies for the exemption under 'textile processing.'Issue 3: Limitation period for the proceedings:The appellant contended that the proceedings were time-barred as there was no suppression of facts, and foreign exchange remittances were duly accounted for. They also referenced the confusion regarding penalties, citing a decision by the Hon'ble High Court of Bombay. The Tribunal considered these arguments in the context of the limitation period and the validity of the penalties imposed.Issue 4: Imposition of penalties under Section 77 & 78 of the Finance Act, 1994:The Tribunal reviewed the penalties imposed by the original authority and the Commissioner (Appeals) under Section 77 & 78 of the Finance Act, 1994. Considering the appellant's arguments and the previous decisions by CESTAT Chennai, the Tribunal analyzed the applicability of penalties in light of the exemption under Notification No.14/2004-ST and the absence of deliberate intent to evade payment of service tax.In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for service tax under reverse charge. Citing previous decisions and the applicability of Notification No.14/2004-ST, the Tribunal granted the appellant the benefit of exemption, emphasizing that the commission paid to overseas agents for export promotion activities falls under Business Auxiliary Service. The Tribunal also addressed the limitation period, penalties, and the possibility of availing cenvat credit for service tax paid. The appeal was allowed, and the impugned order was set aside, providing consequential benefits to the appellant as per the law.