The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore Bench has held that no service tax payable on receiving ‘indent commission’ from their overseas holding company.
Facts
The appellants-assessee are engaged in providing as well as receiving taxable service under the categories of ‘Maintenance or Repair Services’, ‘Erection, Commissioning or Installation Services’ and ‘Business Auxiliary Services’(BAS).
During the relevant period 15.03.2005 to 31.03.2006 they have received ‘indent commission’ from the overseas holding company M/s. Sartorius AG Germany.
Alleging that the amount received by the appellant falls under the category of Business Auxiliary Service, show-cause notice was issued to them for recovery of the service tax amount of Rs.7,36,222/- with interest and penalty.
Similarly in appeal No.ST/1899/2010, they have received ‘indent commission’ from their holding company during the period 15.03.2005 to 31.03.2006 but failed to discharge service tax.
Accordingly, a show-cause notice was issued to them for recovery of the service tax of Rs.21,85,250 along with interest and penalty. Both the notices have been adjudicated by the adjudicating authority under respective orders, confirmed the demands with interest and imposed penalties under Section 76, 77 and 78 of the Finance Act, 1994 against the appellants. The appellants filed appeals before the Commissioner(Appeals) who in turn rejected the same.
Issue raised
Whether the appellants are required to pay service tax for receiving ‘indent commission’ from their overseas holding company?
Assessee’s Arguments
The Appellants contented that they have procured orders from the Indian companies for its holding company abroad (principal). It was the holding company in Germany that consumed the BAS services provided by the Appellants for which the Appellants received the ‘indent commission’ (consideration for having exported BAS), which was a pre-determined percentage of the sales on such orders procured by the Appellants. In other words, the BAS services were provided at the behest of the German holding company in exchange for a consideration. It was only the said holding company which was obliged to make payment for such BAS received by it and not its customers in India. The recipient of the BAS provided by the Appellants was, therefore, the holding company in Germany and not its customers in India.
Conclusion
The tribunal held that the services rendered by the appellant to their holding company would fall within the scope of Export of Service Rules, 2005. The service tax demand cannot be sustained.
Case Details
Case Name: M/s. Sartorius Stedium India Pvt. Ltd. v/s The Commissioner of Service Tax
Citation: Service Tax Appeal No. 1898 of 2010
Tribunal: CESTAT Bangalore
Coram: Dr. D.M. Misra, Member (Judicial) and Mrs R Bhagya Devi, Member