2025 (4) TMI 819 - AT - Service Tax

Irregular availment of benefit of exemption of service tax under N/N. 18/2009-ST dated 07.07.2009 or N/N. 42/2012-ST dated 29.06.2012 on the commission paid to foreign selling/ marketing agents - violation of the condition that cenvat credit should not be availed on the specified service - HELD THAT - As per N/N. 18/2009-ST and 42/2012-ST a declaration is required to be made regarding non-availment of Cenvat credit on specified service. Further for the period from June 2012 to March 2015 as per N/N. 42/2012-ST dated 29.06.2012 there is only one service that has been exempted from service tax that is services provided by a commission agent located outside India under Section 66B of the Act. However the adjudication authority has interpreted the words specified service used for export of such goods and has referred to any other services used for export of goods that were granted same exemption either in the same or similar Notification. The Respondent by adopting this interpretation it was held that since appellant had availed CENVAT credit on GTA services/other services used for export of goods appellant is not eligible to avail the benefit of exemption on commission paid to foreign selling/marketing agency . As regards the claim of the Appellant that the foreign commission agent is an intermediary under the Place of Provision of Service Rules 2012 since the Appellant himself had admitted that the service provided by them as falling under Business Auxiliary service and paid service tax over and above the exempted limit of 1% under N/N. 18/2009-ST or 10% under N/N. 42/2012-ST hence their said contention is unsustainable. As regards the claim of the Appellant that they are exempted from payment of service tax under the provision of Section 26(1)(E) of the Special Economic Zone Act 2005 r/w Rule 31 of the Special Economic Rule 2006 there are force in the above submission as regards that part of the exports from the Special Economic Zone. In spite of giving specific submission to that effect in the reply to show cause notice it appears that the Adjudication authority has not considered the above aspect. Extended period of limitation - HELD THAT - The Appellant were submitting their returns in time and also complied with the conditions as stipulated. Facts being so in the absence of any specific allegation regarding fraud collusion willful mis-statement or suppression of facts for evading payment of service tax invoking the extended period of limitation for confirming demand is also unsustainable. Conclusion - i) The Appellant had correctly availed the exemption for commission paid to foreign agents by fulfilling the notification conditions. ii) The interpretation that availing CENVAT credit on other services like GTA violated the conditions is rejected. Appeal allowed in part.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue in these appeals is whether the Appellant, M/s. Biocon Limited, irregularly availed the benefit of exemption from service tax under Notification No. 18/2009-ST dated 07.07.2009 and Notification No. 42/2012-ST dated 29.06.2012 on the commission paid to foreign selling/marketing agents, by violating the condition that CENVAT credit should not be availed on the 'specified service' as specified in the notifications.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The relevant legal framework includes Notification No. 18/2009-ST, which provides an exemption from service tax on specified services, including services provided by a 'commission agent located outside India'. Similarly, Notification No. 42/2012-ST also provides an exemption for services provided by a commission agent located outside India. The conditions for availing these exemptions include a declaration of non-availment of CENVAT credit on the specified services. The Appellant argued that as long as CENVAT credit was not claimed on the commission paid to foreign agents, they were eligible for the exemption.

Court's Interpretation and Reasoning

The Tribunal considered the interpretation of the term 'specified service' and whether it extended to other services used for export, such as Goods Transport Agency (GTA) services. The adjudicating authority had interpreted the notifications to mean that availing CENVAT credit on any service related to export would violate the conditions of the exemption. However, the Tribunal found this interpretation unsustainable, referencing the judgments of the Supreme Court in Union of India Vs. Wood Papers Ltd. and Novopan India Ltd. Vs. Collector of Central Excise, which emphasize a strict interpretation of exemption notifications.

Key Evidence and Findings

The evidence presented included declarations made by the Appellant, shipping bills, agreements with foreign agents, and compliance with conditions such as the submission of half-yearly returns. The Appellant argued that they complied with the notification conditions by not claiming CENVAT credit on the commission paid to foreign agents. The Tribunal found that the Appellant had indeed complied with the conditions for the specified service of commission paid to foreign agents.

Application of Law to Facts

The Tribunal applied the law by considering the specific language of the notifications, which required non-availment of CENVAT credit on the specified service. The Appellant's compliance with these conditions was supported by documentation and declarations. The Tribunal concluded that the Appellant had not violated the conditions of the notifications concerning the specified service of commission paid to foreign agents.

Treatment of Competing Arguments

The Respondent argued that the Appellant had violated the conditions by availing CENVAT credit on GTA services, which were also used for export. However, the Tribunal found that the notifications did not interlink the exemption for commission paid to foreign agents with other services like GTA. The Appellant's interpretation, supported by legal precedents, was favored.

Conclusions

The Tribunal concluded that the Appellant was eligible for the exemption under the notifications as they had not claimed CENVAT credit on the specified service of commission paid to foreign agents. The demand for service tax based on the alleged violation of notification conditions was found unsustainable.

SIGNIFICANT HOLDINGS

Core Principles Established

The Tribunal established that exemption notifications must be interpreted strictly according to their terms. The specified service for which the exemption is claimed must be the focus, and compliance with conditions related to that service is crucial.

Final Determinations on Each Issue

The Tribunal determined that the Appellant had correctly availed the exemption for commission paid to foreign agents by fulfilling the notification conditions. The interpretation that availing CENVAT credit on other services like GTA violated the conditions was rejected. The appeals were partially allowed, with the Tribunal acknowledging the Appellant's compliance with the exemption conditions and the unsustainability of the extended period of limitation for the demand.