TaxTMI 
TaxTMI 
TaxTMI 
2025 (6) TMI 15
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....eration in foreign currency from buyers. As the Appellant was exclusively engaged in the export of goods, therefore the appellant had not sought registration under service tax. 3. During the audit of the appellant's records, the Department observed that the appellant had paid certain expenses in foreign currency, on which tax had not been paid under the Reverse Charge Mechanism (RCM). The Department alleged the following: * Bank charges paid to foreign banks are subject to service tax under RCM, classifiable under 'Banking and Other Financial Services' (BOFS). * Commission paid to agents is liable to service tax under RCM, taxable under 'Business Auxiliary Services' (BAS), as the Appellant had promoted the agents' business. * Design charges paid to professionals are subject to service tax under RCM, categorizable as 'Design Services'. 4. A show cause notice dated October 17, 2012, was issued to the appellant proposing a service tax demand of Rs. 10,09,952/-, which was subsequently adjudicated by the Additional Commissioner vide Order-in-Original dated August 30, 2013. Vide the said order, the demand for Rs.1,67,895/- was dropped on account of com....
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....er-recipient relationship existed between the Appellant and the designers. 8. Learned counsel contended that the Commissioner (Appeals) had overlooked a crucial fact that the appellant was a 100% EOU. Consequently, any tax paid by the appellant under the Reverse Charge Mechanism (RCM) would be available to them as CENVAT Credit or liable to be refunded thus the situation was revenue neutral. 9. Learned counsel stated that extended period of limitation was not invocable in the present case as interpretational issues were involved. Further, he contended that it was a revenue neutral situation. He submitted that it was a settled legal position that extended period was not invocable in the case of revenue neutrality. Reliance was placed on the following decisions: (i) Jet Airways (1) Ltd Vs. CST, Mumbai-2016 (44) STR 465 (Tri- Mumbai), dated 29.07.2016 (ii) The aforesaid decision has been affirmed by the Hon'ble Apex Court in Jet Airways (India) Ltd. v. Commissioner-2017 (7) G.S.T.L. J35 (S.C.). (iii) M/s. The Indure Private Limited Versus Commissioner of Service Tax, New Delhi-2025 (3) TMI 380 - CESTAT New Delhi, Dated 05.03.2025. 10. Learned counsel further stat....
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....id to foreign banks are subject to service tax under reverse charge? (ii) Whether Commission paid to agents is liable to service tax under reverse charge? (iii) Whether design charges paid to professionals are subject to service tax under reverse charge? (iv) Whether extended period has been rightly invoked? 16. We will take up each issue for consideration: Bank charges paid to foreign banks:- It is noted that the foreign buyers or clients of the appellant avail the services of the foreign banks to facilitate payments to the appellant in foreign currency. It has been submitted before us that there was no arrangement between the foreign banks and the appellant for such payments, instead the appellant bore the bank charges based on an understanding with their foreign buyers/clients. The Department has submitted that the same was payable in terms of section 66A of the Finance Act, under Banking & Financial Services. In order to appreciate the submissions, it would be appropriate to reproduce the definition of Banking & Financial services:- "(12) "banking and other financial services" means (a) the following services provided by a banking company or a financial institution....
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....ny service provided or to be provided to any person by a banking company or a financial institution including a non-banking financial company or any other body corporate or commercial concern, in relation to banking and other financial services; 17. In the instant case, the department has noted that the Balance Sheet of the appellant reflected Foreign Bank charges which was paid by them in foreign currency deducted from their account in lieu of services received by them from the foreign bank. The Ld Counsel has submitted that the appellant did not have any privity of contract between the appellant and the foreign bank. We are of the opinion that the facts in the instant case indicate that appellant had booked the sale, and instead of reducing these amounts released against such sale, had booked the same under the head charges/ deductions levied by the Foreign Banks, so as to distinguish such deductions from the actual export proceeds. As such, the Foreign Bank of the customer located outside India has not provided any service to the appellant located in India. In the instant case, the buyer is the client for the Foreign Bank, and not the appellant. Thus, we are of the opinion tha....
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....- CESTAT NEW DELHI 18. We now take up the second issue for consideration: Commissioner payment to Agent: We note that the show cause notice has alleged that the appellant had made commission payment in foreign currency to foreign principal for procuring orders. In the instant case, it has been submitted by Ld Counsel that such agents had been appointed by the foreign buyers to identify potential suppliers and the Commission agent was providing services to their foreign clients. We note that services provided by a commission agent are included in the category of taxable service termed as "business auxiliary service". In cases where this 'service' is provided by a service provider who is based outside India to a service recipient who is based in India, Section 66A, inserted by the Finance Act, 2006 read with the Service Tax Rules, 1994 mandate that service tax liability is to be discharged by the service recipient. However, a perusal of sample purchase order of the client M/s TESCO, it is noted that the terms of the agreement is that the appellant will bear the artwork charges, Foreign Bank charges, Agent commission charges. It is clear from these terms that the services o....
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....e 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 given by the exporter to the foreign buyer. As per the bank realization certificate of exporter, in appendix 22A (scanned above), the amount after deduction of 11%-12.5% which was shown in column 12. The heading of column is 'commission/ discount paid to foreign buyer, agent'. In the entire enquiry, the department has not brought any tip of evidence to show that there is a commission agent exists in this transaction and any amount of commission is paid to such person. Admittedly, in the entire transaction only two persons are involved, one the appellant as exporter of the goods and second the buyer of the goods. In the sale of goods, in case of service of commission agent, if involved, there has to be third person as service provider to facilitate and promote the sale of exporter to a different foreign buyer. In the present case, there is absolutely no evidence that this 11% is paid to some third person as commission. There is no contract of commission agent ser....
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....conclude that DEL was a commission agent, seems to be erratic reading of the clauses of agreement and this itself does not amount DEL has been appointed as "commission agent". The amount indicated on the invoice and recorded in the accounts as commission, in our view, will not attract tax under reverse charge mechanism. We also find strong force in the contentions raised by learned Counsel that in order to tax this account as a commission, there has to be necessarily three parties, seller, purchaser and a person 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." 20. Accordingly, we hold that the demand of service tax on the commission reimbursed by the appellant to their foreign buyer cannot be sustained. 21. We now address the third issue. Payment for Artwork Charges: the show cause notice has alleg....
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....applicable to the facts of this case, as the Provisions of Section 11A(1) of Central Excise Act, 1944 are in pari-materia with the Provisions of Section 73(1) of the Finance Act, 1994. Since in this case, intention to evade the tax is absent, the penalty under Section 78 of Finance Act, 1994 would not be attracted." 23. Similarly, in the case of M/s. The Indure Private Limited vs. Commissioner of Service Tax, New Delhi-2025 (3)TMI 380-CESTAT NEW DELHI the Tribunal held as follows: "16. We now consider the Learned Counsel's submissions regarding revenue neutrality. It has been argued before us that in revenue neutral situations, no malafide intentions can be attributed. In this context, we note that the Apex Court's decision in the case of Formica India Division Versus Collector of Central Excise-1995(3) TMI 98 - SUPREME COURT, the Hon'ble Supreme Court approved an alternative plea of availability of CENVAT credit leading to Revenue neutral situation. It was also held that mere Non Registration and non filing of return cannot be a reason to dismiss the plea of bonafide belief to non taxable nature of the activity of the appellant in that case. This was followed ....