TaxTMI 
TaxTMI 
2023 (7) TMI 200
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....rvice" [BAS], as defined under section 65(19) of the Finance Act, 1994 [the Finance Act]. 3. The show cause notices alleged that the respondents, who are engaged in the business of export of readymade garments, had availed the services of foreign based commission agents in Dubai who procured orders for the respondents and ensured payments after deducting their commissions @ 12.5%, which is also reflected in the export invoices and shipping bills. The said services, it was alleged in the show cause notices provided by the foreign commission agents to the respondents, would be classifiable under BAS. 4. The respondents filed a reply to the show cause notices stating therein that the overseas parties were not commission agents but were buyers which fact would also clearly emerge from the terms of the contract executed between them. It was further stated that the buyers performed some activities with regard to the export of goods in the foreign country in terms of the agreement entered into between the parties and the expenses incurred by the said buyers were reimbursed by the respondents, which expenses have been incorrectly termed as 'commission' in the show cause notices. The ....
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....xpense incurred by them for rendering above mentioned services as per terms of the contracts. 40. I find that it is a fact that in the shipping documents i.e. shipping bills/invoices as well as balance sheets of the assessee, the term 'Commission' has been used therein but these are actually lump sum reimbursement which had to be paid by the assessee to the overseas buyer for rendering the services of post shipment activities till the point of destination. ***** 43. In view of abovementioned facts it is clear in its prestine form that the alleged overseas 'Commission Agents' are in fact the 'Buyers' of the assessee and not commission agent acting on behalf of the assessee and have worked on principal to principal basis and not on principal to agent basis and the actual relation between them is that of 'Buyer and Seller' not of 'Principal and Agent'. The post shipment Services like monitoring the shipments, handling the goods etc., have been rendered by the Overseas Buyers in terms of the contracts for which the assessee has reimbursed them for actual expenses incurred and services rendered by them. It is a well settled legal position that an activity is t....
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....e authority of law, could not have been collected because the transactions were not subject to levy at all. In these circumstances, the collection of duties was per se illegal. This Court, consequently holds on both, on that count as well as on the facts that the petitioners had lodged their protest during the pendency of the proceedings and before the adjudication order was made, the second proviso to Section 11 B of the Act clearly apply. 13. For the above reasons, the impugned order is hereby set aside. The concerned authorities are hereby directed to process the petitioner's refund claim and ensure that the amounts are remitted to it with applicable interest, in eight weeks." (emphasis supplied) 6. When the present appeals, filed by the Department to assail the orders passed by the Commissioner, earlier came up for hearing before the Tribunal on 02.03.2017, the appeals were dismissed holding that the Delhi High Court on merits had upheld the order passed by the Commissioner dropping the show cause notices. The relevant portion of the order passed by the Tribunal on 13.12.2013 is reproduced below: "4. After hearing both the sides and on perusal of t....
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....therefore, will have to be understood only in that context; and not as having adjudicated the correctness of the order passed by the adjudicating authority, which was the subject matter of appeals before the Appellate Tribunal at the instance of the department. In the circumstances, the impugned order deserves to be set aside and parties relegated before the Appellate Tribunal for reconsideration of the appeals on its own merits and in accordance with law, uninfluenced by any observation made by the High Court. We, however, make it clear that we are not expressing any opinion either way on the contentions available to the parties in the remanded appeals. All questions therein are left open. The Civil Appeals are disposed of in the above terms. Pending applications, if any, stand disposed of." (emphasis supplied) 8. This is how the present appeals have come up for hearing. 9. Shri Radhe Tallo, learned authorized representative appearing for the Department made the following submissions: (i) The Commissioner gravely erred in placing reliance on a single contract furnished with the defence reply without verifying whether the said agre....
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....ri. Mumbai)]; (iii) Laxmi Exports and Others vs. Commissioner of Central Excise & ST, Surat [2021 (44) GSTL 284 (Tri. Ahmd.)]; and (iv) Aquamarine Exports vs. C.C.E. & ST, Surat-I [2022 (2) TMI 361 - CESTAT Ahmedabad]. 11. The submissions advanced by the learned authorized representative appearing for the Department and the learned counsel for the respondents have been considered. 12. To appreciate whether the respondents had paid commission to the agents situated in Dubai, on which service tax has been levied on a reverse charge mechanism under BAS, it would be necessary to examine the contract that was executed between the respondent "M/s. Sidh Designers Pvt. Ltd." (described as the 'seller' in the contract) and Super Almas Trading LLC., Dubai (described as the 'buyer' in the contract). The relevant clauses of the contract are reproduced below: "CONTRACT NO. SAT-2095-07-, 14th APR 2007 Dated: 15.04.2007 SUPER ALMAS TRADING LLC., DUBAI, hereinafter referred as the "Buyer" on the one part and SIDH DESIGNERS PVT. LTD., hereinafter referred to as the "Seller" on the other part, have concluded the present contract of the following: SUBJE....
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....tails along with copy of shipping documents and invoices. PACKING AND MARKING:- The goods are to be shipped in the packing agreed with the consignee and protecting the goods during their transportation to the place of destination under the present contract Tag Labels are to be attached to articles indicating the country of origin. SELLAR: SIDH DESGINERS PVT. LTD. "334, ½, WARD No. 4, MEHRAULI, NEW DELHI-110030, INDIA BUYER: SUPER ALMAS TRADING LLC. P.O. BOX NO. 181639, DUBAI" 13. The appellants have also placed other agreements. These agreements contain similar clauses. 14. A bare perusal of the aforesaid contract dated 15.04.2007 clearly shows that M/s. Sidh Designers, which is a respondent, is the 'seller' and the foreign entity in Dubai i.e. Super Almas Trading is the 'buyer'. The goods have been sold on terms that the ownership of the goods shall remain with the seller till the goods are delivered to the buyer after customs clearance at the destination. The prices of the goods have been fixed in US Dollars and include Port Dues, Terminal Handling Charges, Line D.O. Charges, Demurrage, Legalization Expenses and Government....
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....luding breakage from the time the mopeds left the factory or stockyard of the appellants until they arrived at the premises of the dealer and this again would show that the dealers acted as principal to principal in purchasing the mopeds from the appellants. The dealers were also liable under Clause 6 of the agreement to maintain adequate organisation for sale and service of the mopeds, including show rooms, service stations, repair shops, spare parts, salesmen etc. and the mechanics were also to be trained at the cost of the dealers. The relationship between the appellants and the dealers was clearly on principal to principal basis and in the circumstances it is difficult to see how the amount of Rs. 110/-, 145/- and 165/- allowed to the dealers in respect of different varieties of mopeds could be regarded as anything other than trade discount. The appellants charged to the dealers the price of the mopeds sold to them less the amount of Rs. 110/-, Rs. 145/- and Rs. 165/-in respect of different varieties of mopeds. These amounts allowed to the dealers were clearly trade discount liable to be deducted from the price charged to the dealers for the purpose of arriving at the excisable....
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....on who negotiates such transaction. From the records it is very clear that DEL had not negotiated purchase or sale on behalf of appellant or their customers; to our mind the deduction/commission is nothing but trade discount. In view of the factual position as ascertained from the records, we hold that the impugned orders demanding service tax under reverse charge mechanism from appellant are unsustainable and liable to be set aside." (emphasis supplied) 17. This decision of the Tribunal was followed in Laxmi Exports and the relevant portion of the decision is reproduced below: "7. From the above invoice, Shipping Bill and Bank Certificate, it is seen that against the C&F value shown is sales value in the invoice, the amount equivalent to 11%-12.5% was shown as deduction under the head commission and therefore, the net invoice value is the value after deduction of said 11%-12.5%. As per the invoice, 11%-12.5% commission was extended to the foreign buyer of the goods. Since there is transaction of sale and purchase between the appellant and buyer of the goods, whatever value shown in the invoice is a sale value and the deduction shown is nothing but discount giv....
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....bed as the buyer, after deduction of expenses incurred by the buyer. Mere use of the word 'commission' in the clause dealing with terms of payment would, in view of the aforesaid decisions, not mean that 'commission' was paid by the seller. There is no third person who can be said to be acting an agent and the goods were undoubtedly sold on a principal to principal basis. What was actually deducted from the payment to be made by the buyer was the expenses incurred by the overseas buyer and not commission. 20. The Commissioner, therefore, committed no error in concluding that commission was not paid by the foreign entity to the respondents. What was necessary was an examination of the terms of the contract and it was immaterial whether the contract was placed by the respondents during the course of investigation or in the reply filed to the show cause notices, for nothing turns on this, unless it was established by the department that the contract did not exist at all. 21. The statement of Sahdev Gupta made on 24.09.2012 was immediately retracted on 25.09.2012 in the affidavit filed before the District Judge and the relevant portion of the retraction affidavit, which is contai....