No Service Tax on Unpaid Commission to Overseas Agents for Export Sales: CESTAT

The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside and remanded a service tax demand of Rs. 14.81 lakh imposed on M/s Lifelong India Private Limited, 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 Bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) ruled that the issue requires fresh examination, particularly on whether services were actually rendered by the foreign commission agents and whether any consideration was paid. The appellant/assessee, Lifelong India Pvt. Ltd., engaged in the manufacture of motor vehicle parts, exports its products to overseas markets, including North America. For export promotion, the company had appointed foreign commission agents to undertake activities such as market research, customer liaison, negotiations, and after-sales support. However, due to dissatisfaction with the services, the appellant discontinued the arrangement and stopped making commission payments, though provisions were made in its books of accounts as a precautionary measure. Two invoices dated 7 May 2012 were raised by the overseas agents, but no payment was made. Following a departmental audit, the department alleged non-payment of service tax on commission payable to overseas agents and confirmed the demand under reverse charge mechanism, along with interest and penalty. The demand was upheld by the Commissioner (Appeals), leading to the present appeal before CESTAT. The Tribunal examined multiple legal issues, including whether services rendered by overseas commission agents for export sales are taxable in India. Whether service tax can be levied when no consideration is paid. Whether mere accounting provisions trigger service tax liability. Applicability of service tax across different legal regimes (pre-July 2012, post-July 2012, and post-October 2014). CESTAT observed that under Section 66A of the Finance Act, 1994, read with the Import of Services Rules, 2006, services must be received in India to attract service tax. Relying on CBIC Circular dated 19 April 2006 and precedents such as Genom Biotech Pvt. Ltd., the Tribunal noted that the services of overseas agents were performed and consumed outside India, specifically in North America, in connection with export sales. Accordingly, such services could not be treated as import of services. The Tribunal emphasized that service tax is payable only when a service is actually provided for consideration. No services were rendered due to termination of the arrangement. No commission was paid. Provisions made in the books were later reversed In the absence of both service and consideration, the Tribunal held that service tax liability does not arise, though factual verification of reversal entries was required. With the amendment to the definition of “intermediary” under the Place of Provision of Services Rules, 2012, commission agents facilitating supply of goods fall within the intermediary category. CESTAT noted that for intermediary services, the place of provision is the location of the service provider. Since the overseas commission agents were located outside India, service tax could not be levied. The Tribunal also took note of the appellant’s contention that the adjudicating authority 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 complexities, CESTAT set aside the impugned order confirming service tax, interest, and penalty; remanded the matter to the original adjudicating authority and directed fresh adjudication after giving the appellant an opportunity to submit documents proving non-receipt of services and non-payment of consideration The appeal was allowed by way of remand. Case Details 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 Date: 06.02.2026 Counsel For Petitioner: Charanya Lakshmi Kumaran Counsel For Respondent: Mehboob Ur Rehman Click Here To Read Order Read More: Reassessment Based Solely on Audit Objection Invalid: Allahabad HC

No Service Tax on Unpaid Commission to Overseas Agents for Export Sales: CESTAT

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