The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, comprising Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member), has set aside and remanded a service tax demand of ₹14,81,790 against Lifelong India Pvt. Ltd., holding that service tax liability cannot be fastened merely on book provisions for commission payable to overseas agents when no service is received and no consideration is paid.
The appellant, engaged in the manufacture of motor vehicle parts for domestic and export markets, had appointed overseas commission agents to act as non-exclusive sales representatives in North America. The agents were tasked with market research, procuring enquiries, negotiating commercial terms, and providing after-sales support to customers abroad. However, the appellant was dissatisfied with the services and discontinued the arrangement, stopping commission payments while making provisions in its books as a precautionary measure. The overseas agents had raised two invoices dated 7 May 2012, but no payments were made.
Following a departmental audit, the authorities alleged non-payment of service tax on commission payable to overseas agents and confirmed the demand under the reverse charge mechanism along with interest and penalty. The demand was upheld in appeal, leading to the present proceedings before the Tribunal.
Before the Tribunal, the appellant contended that the services of overseas agents were performed and consumed outside India in connection with export sales, and therefore did not qualify as import of services. It was also argued that no service was ultimately rendered due to termination of the arrangement and that no consideration had been paid, as the provisions made in the books were later reversed.
The Tribunal observed that the taxable event under service tax is the provision of service for consideration in the taxable territory. It noted that under the law applicable prior to July 2012, services must be received in India to attract service tax under the reverse charge provisions. In the present case, the services were rendered in North America in connection with export activities, and therefore were not liable to service tax.
For the period from July 2012 to September 2014, the Tribunal recorded that the appellant had made only book provisions and no payment was made to the agents. It held that service tax is payable only when services are received and consideration is paid, and in the absence of both, the liability does not arise. However, it observed that the claim regarding reversal of such provisions required factual verification.
For the subsequent period after 1 October 2014, the Tribunal noted that commission agents would fall within the definition of “intermediary” under the Place of Provision of Services Rules. In such cases, the place of provision is the location of the service provider. Since the agents were located outside India, service tax would not be payable.
The Tribunal also noted the appellant’s contention that the adjudicating authority had travelled beyond the scope of the show cause notice by confirming tax on provisionally booked amounts, even though the notice was limited to commission paid to overseas agents. Considering the factual and legal aspects, the Tribunal set aside the impugned order confirming service tax, interest and penalty, and remanded the matter to the original adjudicating authority for fresh adjudication after giving the appellant an opportunity to submit relevant documents to establish non-receipt of services and non-payment of consideration. The appeal was thus allowed by way of remand.
Appearance
For Petitioner: Charanya Lakshmi Kumaran
For Respondent: Mehboob Ur Rehman
Case Title: M/s. Lifelong India Private Limited Versus Commissioner, Central Goods and Services Tax, Dehradun
Case No.: Service Tax Appeal No. 51005 OF 2021
Coram: Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member)
