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2023 (11) TMI 222 - AT - Service TaxClassification of services - business auxiliary services or not - whether the subsidiary company of appellant located in USA is acting as C&F Agent or as a Commission Agent and if it is a commission agent whether the service tax is payable on the commission received by them in view of the provisions of Section 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994? HELD THAT:- The books are exported by the appellant to the subsidiary company located in USA. The purchase orders are received from the customer directly by the appellant. Further, after the arrival of the said books at USA destination port, the subsidiary company will undertake the clearing activity of the said books from the customs authorities. The invoices to the customers are issued by the subsidiary company. Payment is also received by subsidiary company from the customers located in USA. As per the terms of the agreement,, the subsidiary company retains a 15% commission of the ultimate sale price to the third parties for each shipment or part thereof and bank transfer the reaming 85% proceeds to the appellant. The appellant are booking the said expenses under the head ‘selling expenses’ as ‘commission on sales (export). There is difference between commission agent and consignment agent. Consignment agent actually deals with the goods, when he receives the same from the principal and dispatches them on the direction of the principal, to the ultimate customer. Consignment agent may not be even associated with the procurement of orders or does not directly deal with the sale purchase. He is acting on behalf of the principal and deals with the movement of the goods as per the direction of the principal. On the other hand commission agent is only concerned with the procurement of orders for which he may receive the fixed amount along with some percentage amount. The Subsidiary company is also undertaking the activity of clearing and forwarding agent. No clause of the agreement provides that subsidiary company also undertaking any marketing or promotion activity for the sale of the books exported by the appellant. In such a scenario, the subsidiary company who is the service provider had to be held as consignment agent rather than commission agent. The conclusion of the Learned Adjudicating authority that the appellant are liable to pay service tax under the taxable service ‘Business Auxiliary Services’ cannot be sustained - Appeal allowed.
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