By TIOL News Service

CHANDIGARH, OCT 23, 2016: THE appellant is engaged in the manufacture of excisable goods sold in DTA as well as outside India. They were receiving the services of the overseas Commission Agent and said service was used for export of their goods.

The appellant was required to pay service tax under reverse charge mechanism on this "Business Auxiliary Service" but the appellant sought exemption in terms of Notification 18/2009-ST ibid.

Revenue denied the exemption on the premise that the appellant is not following the complete procedure laid down in the Notification No. 18/2009-ST.Consequently, demand of service tax was raised.

There is also an allegation that the appellant had received manpower recruitment service for loading and unloading of their goods, therefore, the demand of service tax was also sought to be confirmed under this category.

Aggrieved by the said orders, the appellant is before the CESTAT.

It is inter alia submitted that there is no requirement to submit BRC of export goods; that the only requirement of notification is to submit proof of payment to overseas commission agent; that the said fact has been admitted and the basic requirement of the notification has been met; that the shipping bills were submitted with EXP-2 returns; that the overseas commission agent issues invoices through e-mail;and the same is admissible document u/s 36B(1) of the CEA, 1944; that exemption shall be limited to one per cent of the free on board value of export goods for which the said service has been used; that both these requirements have been fulfilled and the other requirements were only procedural and the appellant has also met all those requirements by filing the EXP-1 and EXP-2 returns along with required documents, therefore, exemption cannot be denied.

As regards the demand under the category of Manpower Recruitment Agency service, it is submitted that the appellant had given a contract for loading/unloading on the basis of weight of goods (and not as per the labour provided) and the contractor was paid accordingly; therefore, demand cannot sustain.

The AR supported the order of the lower authorities.

The Bench observed –

Eligibility of exemption notification 18/2009-ST

+ The facts are not disputed that the appellant is receiving service of overseas commission agent and paying commission to the said agent. The basic of requirement of notification has not been disputed by the Revenue, therefore, substantive benefit cannot be denied on account of technical lapses.

+ Further, the payment made to the overseas commission agent is not disputed. The appellant has filed all the shipping bills and copy of invoices issued by the overseas agent. Further, I observe that the commission paid to the overseas commission agent is less than 1% of the FOB value of the exported goods. Therefore, the appellant is entitled for benefit under Notification No. 18/2009-ST.

Activity of loading/unloading by contractor – whether Manpower Recruitment Agency Services

+ As contractor has entered into agreement with the appellant for loading good son weighment basis, the activity cannot be termed as supply of Manpower Recruitment Agency Service.

Holding that the impugned orders lack merits, the same were set aside and the appeals were allowed with consequential relief.

(See 2016-TIOL-2764-CESTAT-CHD)