TaxTMI 
TaxTMI 
2025 (6) TMI 685
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....the appellant to their foreign buyers indicated the commission amount separately which was deducted from the gross value of the export goods to arrive at the net invoice value. Likewise, in the shipping bills also, FOB value is inclusive of the commission amount. The appellant received foreign remittances in respect of exports done by reducing the amount to the extent of commission indicated in the invoices. Scanned copy of Export Invoice No. AE/M/10/09-10 dt. 20.05.2009, Shipping Bill No. 7352130 dt. 21.05.2009 & Bank Certificate of export and realisation is appended below:- The commission amount is calculated as a percentage of export value, but it is generally less than 12.5%. The department also recorded statements of Shri Rajesh Nigania, Director of the appellant on 07.05.2014 who admitted to have paid the commission amount to their foreign buyers who in turn paid the same to their commission agent. In reply to question no.8, he admitted that they have not appointed any foreign commission agent; that for export business, it was a normal trade practice to extend commission; that in his case, the foreign commission agents have never provided any service in relation to export ....
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....e. Therefore, they have disclosed everything at all points of time and allegation against them for suppression of fact is not sustainable. • The exchange control manual and the DGFT Circulars point out that the foreign buyer may deduct the commission amount and pay the balance amount to the exporter. The commission agent has not been appointed by the appellant and is never known to them. They requested for setting aside the impugned order dated 19.06.2017 and set aside the demand pressed against them. 2.2 During argument, learned Advocate of the appellant pleaded the ground of revenue neutrality and limitation. He mentioned that if they were required to pay service tax on reverse charge basis, they would have been entitled to either Cenvat Credit or refund of the same as taxes are not exported outside the country. On limitation issue, he mentioned that payment of commission was fully reflected in the export invoices and shipping bills and therefore, extended period is not invocable. He mentioned that payment of commission deducted from the export invoice is nothing but discount extended by Indian exporter to the foreign buyer. He cited the following case laws which ....
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....the appellant in his statement dated 07.05.2014 clearly accepts that there was no written or verbal agreement and they have neither appointed any foreign commission agent nor paid any commission directly to them; that whatever commission is reflected in the export invoices, shipping bills etc. is paid to the foreign buyer which cannot be equated to commission paid to the foreign commission agent. (Reply to question no.13) He goes on to say that since they have not received any service in relation to export goods, they are not liable to any service tax. 4.2 We find that the issue is no more res-integra as it has been held in series of cases that service tax on commission amount paid to foreign buyer is not leviable to service tax. In a recent decision by this Tribunal in the case of Suryanarayanan Synthetics Private Limited Versus CCE & ST -Surat-I-2024 (8) TMI 908-CESTAT Ahmedabad, it has been held that when there is no contract/agreement between Indian exporter and foreign based service provider then the demand of service tax on the commission shown in the export invoices raised on the foreign buyers cannot be held sustainable even if there any arrangement of payment between th....
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....'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 service with any of the commission agent, there is no person to whom payment of commission was made therefore, it is clear that no service provider i.e. foreign commission agent exists in the present case and no service was provided by any person to the appellant. In the absence of any provision of service, no service tax can be demanded. The trade discount even though in the name of commission agent was given by the appellant to the foreign buyer,....
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....ion, 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." (c) Hindustan Petroleum Corporation Limited - 2019 (24) GSTL 569 (Tri. Del.), identical issue was decided wherein the HPCL, under an agreement for sale to retail customer purchased CNG from Indraprasth Gas Limited, the HPCL received consideration. The Tribunal held that the said consideration is in the nature of discount as agreement between HPCL and IGL is not on principal to agent basis but on principal to principal basis therefore, HPCL is not liable to service tax under the head of Business Auxiliary Service. In the case of PrabhakarMarotraoThaokar& Sons vs. CCE, Nagpur - 2019 (20) GSTL 294 (Tri. Mumbai), the department raised demand on discount given by manufactu....
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....f facts on their part. Since undisputedly, the amount of commission considered by the Revenue as against Business Auxiliary Service is related to export of goods, the same in any case will not be taxable. For this reason also no malafide can be attributed to the appellant. Hence, longer period of demand shall not be invoked. In this regard, the judgment relied upon by the appellant in the case of Texyard International vs. CCE, Trichy (supra) 2015 (8) TMI-794 (CESTAT-Chennai) support their case. Therefore, the demand for the extended period is not sustainable on limitation also. 6. In view of above judgments, we find that the issue is no longer res-integra and settled in favour of the appellant. Accordingly, the demand of service tax on the commission deducted in the sale invoice of the appellant to their foreign buyer is not chargeable to service tax. Accordingly, the impugned order is set-aside with consequential relief to the appellant. The appeal is allowed. (Pronounced in the open court on 09.06.2025) ============= Document 1 (1) Scanned copy of Export Invoice No. AE/M/10/09-10 dated 20.05.2009 PROFORMA INVOICE M/s. AKSHITA EXPORTS 616, EMPIRE STATE BUILDING, N....
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....t (KGS) $3247.900 Net Wt(KCS) $2995.900 Country of Dest SUNITED ARA EMIRATES No.of Ctrs. : 1 Rotation NO. 123348 C,Rotation Date : 07/05/2009 Nature of Cargo . C Marks and Nos. : STL DUBAI HANSIT CTN NOS. 613 TO 663 592 TO 612 FOREX BANK ACCI1019377 RBI Waiver No/Datu! FOS VALUE (INRA) 4 3593407.6- AD. Coda 16410016 Bank cho 100030062870300 DBK ( INR) :377308.00 I.F.5. Code : BBIN0007491 INVOICE DETAILS Envoi ca 1/1 Inv.val 13596982.63 INR 72446.78 USD 13593407.83 INR FOB Val TAE/M/10/09-1 Inv.no. Inv Dt 120/05/2009 Nat. of con Curr (inv) :USD (Usp)" 49.650 (INR) Exchange rate $1.00 Rato Currency Amount Insurance 0,00 0.00 USD Freight# 72.00 Discount! 0.00 0.00 Comission 11.00 USD 7969.15 Other Deductions10.00 0,00 Packing Charges? UBD 0.00 Nature of payment:DA Period of Payment :90 Buyer.Name & Address Quote Certificates M/S. ADVANTEC INTERNATIONAL TIDING LLC. r.o. BOX NO. 12637. DEIRA, Duir U.A.E. (PH. 009714 - 2769019) Page 1 of 4" > Document 3 UKIGINAL APPENDIX - 22A FORM NO. 1 ....