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2023 (7) TMI 200 - AT - Service TaxLevy of Service Tax - business auxiliary service (BAS) - whether the amount paid by the respondents to overseas companies situated in Dubai and shown as commission in the shipping documents in relation to export of readymade garments by the respondents is liable to be taxed under business auxiliary service (BAS), as defined under section 65(19) of the Finance Act, 1994? - reverse charge mechanism. HELD THAT:- A conjoint reading of all the clauses of the agreement leaves no manner of doubt that it is the overseas expenses incurred by the buyer that have to be deducted from the payment to be made by the buyer to the seller and this is limited to 12.5% of the invoice value. Wrong use of the word “commission” in the contract, particularly when the said amount has also been referred to as “expenses” in the same contract will not mean that ‘commission’ has been paid by the seller. It is apparent from a conjoint reading of the various clauses of the aforesaid contract dated 15.04.2007 executed between Super Almas Trading and M/s. Sidh Designers Pvt. Ltd. that M/s. Sidh Designers, as seller, had agreed to sell the goods to Super Almas Trading, which has been described 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 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. 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. The Commissioner was justified in dropping the demand proposed in the show cause notices - Appeal dismissed.
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