TEXYARD INTERNATIONAL Vs. COMMISSIONER OF CENTRAL EXCISE, TRICHY

JUDGEMENT

(1.) BOTH the assessee's appeals and Revenue's appeal are taken up together as the issue involved is common in nature. The appellant -assessees are manufacturer of textile made ups and exporting the same. They availed the services of overseas commission agents for procurement of orders and paid commission. Show cause notices were issued to the assessees demanding service tax on the import of services under Business Auxiliary Services under reverse charge mechanism. The adjudicating authority confirmed the demands and interest and dropped penalties proposed under Sections 76, 77 & 78. Against this order, both assessee and Revenue filed appeals before Commissioner (Appeals). The appellant -assessee contended the service tax demand and the Revenue filed appeal against waiver of penalty. Commissioner (Appeals) rejected both assessees' appeals and the Revenue's appeal.

(2.) In respect of appellants, M/s. Texyard International (Appeal No. ST/220/2012), M/s. Sree Angalamman Exports (Appeal No. ST/230/2012) & M/s. Atlas Export Enterprises (Appeal No. ST/230/2012), the issues are identical wherein they filed appeals against the service tax demand. In the case of M/s. Kangaroo Impex, Revenue filed Appeal No. ST/235/2012 against waiver of penalty.

(3.) HEARD both sides. Ld. advocate submits that all the three appellants are manufacturer -exporters and all their products are exported outside India. In order to procure orders, they have engaged overseas commission agents. Only after securing the confirmed orders from overseas buyers, they procure yarn, dyes/chemicals and other raw materials for the manufacture of textile made ups. The entire activity is predominantly known as textile processing. Since their entire activity is dependent upon export orders, without securing the confirmed overseas orders, they cannot undertake manufacture of Textile made ups as quantity, design and specification of export goods is to be met as per overseas buyers requirement. He further submits that overseas commission agent service have direct nexus with the manufacturing and textile processing of finished goods and the commission paid to the overseas buyers is an input service as they are engaged in the textile processing. During the material period, the Notification No. , dated 10 -9 -2004 exempts taxable service provided to a client in relation to Business Auxiliary Service, Agriculture, Printing, Textile Processing Industry. The lower appellate authority had denied the exemption. As they are the textile manufacturer and exporters, the exemption under the above notification is not applicable to them. He further submits that as per Foreign Trade Policy Notifications for the Policy Period 2004 -09, para 2.483 provides that all goods and services exported from India, the services received/rendered abroad shall be exempted from service tax. He submits that FTP policy at para 2.483 read with exemption Notification No. , the government has consciously exempted service tax on Business Auxiliary Service during the relevant period on the impugned service availed. He further submits that the appellants are also eligible to get the refund under Notification No. 41/2007 -S.T. as amended by Notification No. 17/2008 -S.T. on the service tax paid on such service as they are eligible to avail the credit on the service tax paid under reverse charge. He also submits that the demand is also hit by limitation as there is no suppression of facts as it is only question of interpretation and they are regular exporters as well as the foreign exchange remittances are duly accounted in Profit & Loss Account. Therefore, extended period cannot be invoked. As regards Revenue's appeal against waiver of penalty under Sections 76, 77 & 78, ld. advocate submits that both the lower authorities have rightly waived penalty. He relied on the following decisions: -