2023 (10) TMI 433 - AT - Service Tax

Appeal allowed on Service Tax demand for commission to overseas agents under reverse charge.

The appeal against the demand of Service Tax on commission paid to overseas agents under reverse charge mechanism was allowed. The Bench found the ... Extended period of limitation - business auxiliary service - commission paid to overseas agents under reverse charge mechanism as per Section 66A of the Finance Act, 1994 invoking the proviso to Section 73(1) of the Finance Act, 1994 - HELD THAT:- This Bench in the case of M/s. Texyard International [2015 (8) TMI 794 - CESTAT CHENNAI] had occasion to analyse an identical issue wherein, after considering the submissions of both sides, the Bench had observed that The exemption of service tax under BAS was allowed in relation to four industries namely agriculture, printing, textile processing and education. Therefore, the appellant being textile industry, it is covered under the category 'textile processing' in the notification. The ratio laid down in the above case has been followed by this Bench in the case of M/s. Madras Security Printers Pvt. Ltd. v. Commissioner of Service Tax, Chennai [2023 (4) TMI 1195 - CESTAT CHENNAI]. The impugned order set aside - appeal allowed. Issues involved: Appeal against demand of Service Tax on commission paid to overseas agents under reverse charge mechanism invoking proviso to Section 73(1) of the Finance Act, 1994 for the period from April 2007 to March 2011.Summary:1. Invocation of Extended Period of Limitation:- The appellant contended that the invocation of extended period of limitation was not justified as the issue was under dispute before various fora during the disputed period.- Cited precedent cases to support the argument that the appellant was under a bona fide belief that tax was not payable and the situation was revenue neutral, hence the extended period of limitation was not proper.2. Eligibility for Exemption under Business Auxiliary Service:- The Bench analyzed the issue of eligibility for exemption under Business Auxiliary Service under Notification No. 14/2004-S.T., dated 10-9-2004.- Found that the appellants, being manufacturer-exporters in the textile industry, were covered under the category of 'textile processing' in the notification.- Commission paid to overseas agents for export promotion activities was considered incidental or auxiliary to textile goods processing, thus entitled to exemption from service tax under reverse charge.3. Suppression of Facts and Intent to Evade Payment:- The appellants, as exporters, were not expected to export taxes and pleaded no deliberate intention to evade payment of service tax.- Claimed a bona fide belief based on EXIM Policy and asserted that the demand was hit by limitation, and the extended period could not be invoked.4. Revenue-Neutral Situation and Cenvat Credit:- Service tax payable under reverse charge was eligible as Cenvat credit, refundable under Notification No. 41/2007, ensuring a revenue-neutral situation for the exporters.- The demand of service tax under reverse charge was set aside, and the question of imposing penalty did not arise.5. Judicial Precedents and Decision:- The Bench followed the ratio laid down in previous cases where similar issues were addressed, setting aside the impugned order and allowing the appeal with consequential benefits as per law.Final Decision: The appeal against the demand of Service Tax on commission paid to overseas agents under reverse charge mechanism was allowed, following consistent views held in various cases, with consequential benefits granted as per law.