Service tax demand on foreign agent commission payments fails due to lack of suppression or willful evasion

CESTAT Ahmedabad ruled in favor of appellant regarding service tax demand on commission payments to foreign agents for petroleum trading during 2008-09 and 2009-10. The tribunal held that extended limitation period cannot be invoked without suppression of facts, willful mis-statement, or collusion with intent to evade tax. Since appellant made bona fide belief that no service tax was payable on foreign agent payments under Business Auxiliary Services, and the situation was revenue neutral with no deliberate evasion, the demand under extended period was unsustainable. Appeal allowed and impugned order set aside.

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Issues:
The issues involved in this case include the liability of service tax on commission paid to a foreign agent for trading petroleum products and the service tax liability on Technical Testing and Analysis services received by the appellant.

Commission Paid to Foreign Agent:
The appellant, engaged in providing taxable services, paid a commission to their foreign agent for trading petroleum products. The commission fell under the category of 'Business Auxiliary Services' and was classified under sub clause (zzb) of clause 105 of Section 65 of the Finance Act, 1994, making it liable for service tax. The appellant contended that since the service was performed abroad in connection with the supply of goods outside India, it should not be subject to service tax in India. The appellant argued that they had not paid service tax on the belief that services performed outside India were not taxable. The Tribunal found that there was no deliberate intention to evade service tax, and as the appellant was registered with the Service Tax department and the transactions were recorded in their books, the demand for service tax under the extended period was not sustainable on limitation grounds.

Technical Testing and Analysis Services:
The appellant also received Technical Testing and Analysis services, for which a service tax liability of Rs. 26,193/- was determined. The appellant argued that they had not paid service tax on these services based on a bona fide belief that services performed outside India were not taxable. The Tribunal found that there was no suppression of facts on the part of the appellant and that the extended period of limitation could not be invoked as there was no evidence of deliberate intention to evade tax. The Tribunal held that the demand for service tax on these services was not sustainable on limitation grounds.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal and ruling in favor of the appellant. The Tribunal found that the demand for service tax on both the commission paid to the foreign agent and the Technical Testing and Analysis services was not sustainable on limitation grounds, as there was no evidence of deliberate intention to evade tax. The appellant's registration with the Service Tax department, recording of transactions, and lack of suppression of facts supported the decision to set aside the demand for service tax.

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