By TIOL News Service

HYDERABAD, MAR 04, 2019: IT is the case of the revenue that the appellant having paid an amount to a person situated abroad, under reverse charge mechanism is liable to pay service tax.

Appellant contested the SCN on the grounds that the activity undertaken by them is of procuring raw tobacco, threshing and drying, packing and exporting the same which is exempted from payment of Service tax under notification 13/2003-ST.

The adjudicating authority upheld the demand and the Commissioner(A) followed suit.

Before the CESTAT, the appellant submits that issue is no more res integra and is covered by the judgment of the Tribunal in the case of Chebrolu Agros Pvt Ltd -   2017-TIOL-3203-CESTAT-HYD holding that threshing and drying of the tobacco leaves will not amount to any service falling under the category of 'Business Auxiliary Services' and that this judgment has been upheld by the apex court. Furthermore, as regards the commission paid to person situated abroad, the same will also get covered under the notification 13/2003-ST in view of the settled law laid down in Olam Agro India Ltd -  2018-TIOL-2826-CESTAT-DEL.

The AR submitted that threshing and drying of tobacco will amount to processing and once processed, the tobacco leaves cannot be considered as agricultural produce and any commission paid by the appellant for the sale of such processed goods is taxable under reverse charge mechanism.

The Bench considered the submissions and observed that in view of the settled case law the Tribunal has no hesitation to hold that the activity undertaken by the appellant of threshing and drying of raw tobacco leaves would not come under category of 'Business Auxiliary Service' and is not a taxable activity.

Insofar as the taxability of the commission paid to foreign commission agent, under reverse charge mechanism, the Bench noted that the Tribunal in the cited case (supra) had specifically held that the transaction would fall under the purview of notification 13/2003-ST and eligible for exemption and hence no tax is payable.

The impugned orders were set aside and the appeals were allowed.

(See 2019-TIOL-684-CESTAT-HYD)