2016 (1) TMI 1013 - AT - Service Tax

Export of services in relation of import of goods - commission received from the foreign suppliers in respect of the imports into India - The Indian buyers made payments directly to the foreign seller and the foreign seller paid commission to the appellant. In some cases buyers opted to pay the commission directly to the appellant and in such cases commission part shown in the invoice was not paid on to the seller by the buyer. - Held that - In case of the commission received from foreign supplier for procuring orders from the Indian buyers to whom the goods were directly supplied by the foreign supplier, the service rendered clearly satisfies the requirement of the same being the export of service. In the case of J. B. Boda 1996 (10) TMI 70 - SUPREME Court the Supreme Court has deemed such payments to be in foreign exchange. Thus we find that the issue is covered in the appellant s favour by the judgment of CESTAT in the case of Paul Merchants 2012 (12) TMI 424 - CESTAT, DELHI (LB) read with judgement of the Supreme Court in the case of J. B. Boda. - Demand set aside - Decided in favor of assessee.

Summary

Issues:
Service tax demand on commission received from foreign suppliers for procuring orders from Indian buyers.

Analysis:
The appeal was filed against an order-in-appeal that confirmed a service tax demand of Rs. 49,99,770 along with interest and penalties. The demand was based on the appellant not paying service tax on the commission received from foreign suppliers for procuring orders from Indian buyers. The Commissioner (Appeals) upheld the order, stating that the service was delivered in India, not tantamount to export of service. The appellant argued that the commission received from the foreign supplier constituted export of service, citing a relevant case law. They also contended that even when the commission was paid directly by Indian buyers, it was essentially on behalf of the foreign supplier. The Departmental Representative (DR) argued that the transaction involved a foreign company with an office in India, making the cited case law inapplicable.

Upon considering the arguments, the Tribunal found in favor of the appellant. They held that when the commission was received for procuring orders from Indian buyers to whom goods were directly supplied by the foreign supplier, it constituted export of service. Even in cases where Indian buyers paid the commission directly to the appellant, the Tribunal deemed it as paid on behalf of the foreign supplier. This arrangement simplified the process without affecting the foreign exchange implications. The Tribunal referred to a Supreme Court judgment that deemed such payments to be in foreign exchange. They concluded that the issue was covered in the appellant's favor by the relevant case laws and allowed the appeal, stating that the impugned order was not sustainable.