Reverse charge on foreign agent commission applies only from 18-4-2006; receipt and limitation issues require fresh adjudication.

Commission paid to foreign agents for procuring orders was not subject to service tax in the recipient's hands for the period prior to 18-4-2006, because reverse charge liability on services from a non-resident was not then applicable; from 18-4-2006 onwards, such commission became taxable. The questions whether tax, if any, should be computed only on amounts actually received rather than bill amounts, and whether limitation applied, had not been decided and therefore required fresh adjudication by the Adjudicating Authority in accordance with natural justice.

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Issues: (i) Whether commission paid to foreign agents for procuring orders was liable to service tax for the period prior to 18-4-2006 and for the period thereafter; (ii) Whether the questions relating to actual receipt of commission and limitation required reconsideration.

Issue (i): Whether commission paid to foreign agents for procuring orders was liable to service tax for the period prior to 18-4-2006 and for the period thereafter.

Analysis: The liability of the recipient of services from a non-resident was governed by the reverse charge mechanism. The settled position applied was that, for the period prior to 18-4-2006, the recipient could not be taxed in India in respect of such services. From 18-4-2006 onwards, service tax liability arose in respect of the commission paid to foreign agents.

Conclusion: The commission was not taxable in the hands of the appellant for the period prior to 18-4-2006, but was taxable thereafter.

Issue (ii): Whether the questions relating to actual receipt of commission and limitation required reconsideration.

Analysis: The appellant had raised the plea that tax, if any, was payable only on the amount actually received and not on the bill amount, and had also raised limitation. No findings had been recorded on these matters, making reconsideration necessary. The matter was therefore required to be examined afresh by the Adjudicating Authority in accordance with natural justice.

Conclusion: The issues of actual receipt and limitation were remanded for fresh decision.

Final Conclusion: The matter was sent back for reconsideration on the unresolved issues, while the legal position on taxability was clarified for the relevant period.

Ratio Decidendi: In respect of services received from a non-resident, reverse charge liability could not be fastened on the recipient for the period prior to 18-4-2006, but such liability applied thereafter; unresolved questions of quantification and limitation required fresh adjudication.

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