Service Tax on Overriding Commission received as General Sales Agent for Promoting Foreign Company not subject to Service Tax: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that service tax on overriding Commission received as General Sales Agent for promoting Foreign Company not subject to Service Tax.

M/s. ETA Travel Agency Pvt. Ltd., the appellant was engaged in providing Air Travel Agent Service ( ATAS ) and Business Auxiliary Service (BAS). The appellants availed the credit of various input services received. Three Show Cause Notices were issued for recovery of Cenvat Credit wrongly taken and also for short payment of Service Tax on Overriding Commission.

The issues were commonly adjudicated by the Commissioner being the irregular Cenvat Credit taken and utilized for the period from October, 2007 to September, 2010 under Rule 14 of Cenvat Credit Rules, 2004 (CCR,2004) and demand being the service tax not paid on overriding commission received by the appellants apart from demand of the interest and imposition of penalty.

The appellants submitted that in terms of Rule 3 (3) of Export of Service Rules, 2005, (ESR, 2005) in relation to business auxiliary services, services will be construed as export when such services are provided and used in or in relation to commerce or industry and the recipient of such service is located outside India.

The Counsel for the appellant also contended that in terms of Rule 3(3) of ESR, 2005, in relation to BAS services, it will be construed as export when such services are provided and used in or in relation to commerce or industry and the recipient of such service is located outside India and thus they have satisfied both the conditions.

In Arafaath Travels Pvt. Ltd. vs. Commissioner of Service Tax, it was held that the overriding commission received on account of services rendered under General Sales Agency agreement service entered with Saudi Arabian Airlines was not liable to be taxed as the same amounts to export of service even when payment was received in Indian rupees

The Bench comprising CS Sulekha Beevi, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that “Demand of Service Tax on overriding commission, short payment of service tax as demanded in the impugned order is not maintainable and so set aside.”

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