No Service Tax Is Payable On Commission Received In Convertible Foreign Exchange: CESTAT

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is demandable when the commission received is in convertible foreign exchange.

The two-member bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the commission agent service provided to a foreign-based entity for promoting or marketing their goods in India constitutes an export of services, given that the Indian agent's activity includes providing promotion or marketing, technical support, installation, commission, etc. for the sale of goods by foreign-based entities in India on a commission basis.

The appellant/assessee was issued a show cause notice stating that the appellant has received a commission from various foreign companies for providing services in India; the commission was earned by them for the supply of material by foreign parties (including its principal abroad), i.e., for the service provided towards coordinating the customers in India with the overseas suppliers.

The department submitted that the appellant has provided the services of a commission agent, which is considered a "business auxiliary service" and is taxable with effect from July 9, 2004. The services were rendered in India; hence, they shall not be treated as exports even if they are rendered to any foreign national and he pays for them in convertible foreign currency. The adjudicating authority, while adjudicating the show cause notice, confirmed the demand for service tax and imposed penalties and demanded interest.

The appellant contended that the service was provided in India, but the service recipient is located outside India, and the appellant has received the consideration in convertible foreign currency. Therefore, as per the 2005 Export of Service Rules, the appellant's service qualifies as "export of service" and is not subject to service tax.

The tribunal held that the appellant's service is clearly qualified as an export of service; therefore, it is not taxable.

Case Title: J M Huber India Pvt Ltd. Versus C.C.E. & S.T.-Surat-ii

Citation: Service Tax Appeal No.589 of 2012

Date: 28.11.2022

Counsel For Appellant: Advocate Vinay Kansara

Counsel For Respondent: Superintendent (AR) Rajesh Agarwal

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