Commission Deducted In Sale Invoice To Foreign Buyer Is Not Chargeable To Service Tax: CESTAT

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the commission deducted in the sale invoice of the appellant to their foreign buyer is not chargeable to service tax.The bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed that there is no contract between the appellant and the foreign-based service provider, even if any arrangement of payment is there between the buyer of the goods and the so-called commission agent in the foreign country. The demand of service tax on the commission shown in the invoice raised to the buyer cannot be made.The appellant/assessee is a merchant exporter engaged in the export of textile goods such as fabrics, scarves, sarees, dress material, etc. to various overseas countries, and the said exporter is paying commission to their foreign commission agents in relation to the export of goods. The assessee claimed export incentive on such commission amount under DEPB/duty drawback scheme as envisaged in Foreign Trade Policy 2009-14.The department noted that since the commission shown in invoices is payment made to the foreign commission agent, it is liable to payment of service tax under the reverse charge mechanism in terms of Section 66A of the Finance Act, 1994.The appellant contended that the appellant has not made any payment to the commission agent and no commission agent has provided service to the appellant under the nomenclature of commission, which is deducted in the invoices raised to the buyer. Therefore, the amount cannot be treated as a service charge paid to any individual commission agent in a foreign country; therefore, no service tax can be demanded. The tribunal held that the appellant had not made any payment directly to any commission agent, whereas deduction was provided from the total value of the bill raised to a foreign buyer of the goods. It is nothing but a discount extended by the appellant to the buyer of the goods. Even though some service provider is involved, there is no relationship between the appellant and any foreign-based service provider, as there is no direct transaction made by the appellant with any of the commission agents.The tribunal, while allowing the appeal, held that the service of a commission agent, since it was used for export of goods, is also not chargeable for service tax.Counsel For Appellant: Rasesh ShahCounsel For Respondent: Rajesh R. KurupCase Title: Suryanarayan Synthetics P Limited Versus Commissioner of Central Excise & ST,Surat-ICase No.: Service Tax Appeal No. 10521 Of 2015-DBClick Here To Read The Order

Commission Deducted In Sale Invoice To Foreign Buyer Is Not Chargeable To Service Tax: CESTAT

Mariya Paliwala

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