Custom, Excise & Service Tax Tribunal
Rswm Ltd vs Udaipur on 26 September, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
New Delhi
PRINCIPAL BENCH - COURT NO. 3
Service Tax Appeal No. 50708 Of 2019
[Arising out of Order-in-Appeal No. 1327 & 1328 (CRM)ST/JDR/2018 dated
10.12.2018 passed by the Commissioner (Appeals) of Central Excise and Central
Goods, Service Tax, Jodhpur]
M/s RSWM Limited : Appellant
Kharigram, Gulabpura, Bhilwara
Vs
Commissioner of Central Goods : Respondent
Service Tax, Central Excise, Customs Udaipur 142-B, Hiran Magri, Sector-11 Udaipur with Service Tax Appeal No. 50709 Of 2019 [Arising out of Order-in-Appeal No. 1327 & 1328 (CRM)ST/JDR/2018 dated 10.12.2018 passed by the Commissioner (Appeals) of Central Excise and Central Goods, Service Tax, Jodhpur] M/s RSWM Limited : Appellant Kharigram, Gulabpura, Bhilwara Vs Commissioner of Central Goods : Respondent Service Tax, Central Excise, Customs Udaipur 142-B, Hiran Magri, Sector-11 Udaipur APPEARANCE:
Ms. J. Kainaat, Advocate for the Appellant Shri S. K. Meena, Shri Manoj Kumar, Authorized Representative for the Respondent CORAM :
HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL) HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) FINAL ORDER No. 51370-51371/2025 Date of Hearing:27.06.2025 Date of Decision:26.09.2025 2 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 HEMAMBIKA R. PRIYA The present appeal has been filed M/s RSWM Limited1 to assail the impugned Order-in-Appeal No. 1327 & 1328 (CRM)ST/JDR/2018 dated 10.12.2018 wherein the Commissioner (Appeals) confirmed the service tax amounting to Rs. 8,13,000/- along with interest and penalty.
2. The brief facts of the case are that the appellant is manufacturer of Man Made Blended Yarn having central excise registration, and filing their returns regularly. The appellant was also registered under service tax. The appellant was availing services of Commission Agent located outside India and paying commission to the agents. The appellant was availing the benefit of exemption Notification No. 18/2009-ST dated 07.07.2009 in respect of services viz. the services provided for transport of export goods and the services provided by Commission Agent located outside India. Two Show cause notices 21.03.2011 and 03.08.2011 were issued for demand of Rs.10,92,600 & Rs.8,13,000. In the first round of litigation, the Adjudicating Authority vide Order-in-Original No.65/ST/JP-11/2012 and 66/ST/JP-
11/2012 both dt. 18.04.2012 respectively confirmed the demand. The Commissioner (Appeals) vide Common Order-in-Appeal dt. 24.10.2013 rejected both the appeals. In appeal, the Tribunal vide Final order dt. 06.04.2017 remanded the matter to the original authority for verification of the documents and to decide the issue. In the remand proceedings, the Adjudicating Authority vide Order-in- Original dt. 29.06.2018 allowed the exemption provided for GTA services and denied the exemption of service tax on Commission paid 1 The appellant 3 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 to Foreign/Overseas agents as provided in Notification No.18/2009 ST dt.07.07.2009 and confirmed the demand of Service tax of Rs.7,90,000 & Rs.5,41,600 along with interest and penalty. The Commissioner (Appeals) vide Order-in-Appeal dt.10.12.2018 rejected both the appeals and upheld the order of Adjudicating Authority. Aggrieved by the impugned order, the present appeals were filed before this Tribunal.
3. Learned counsel for the appellant submitted that no written agreements or contracts were entered with the commission agent as a general trade practice. They were showing commission amount in percentage of FOB value in the shipping bills. He contended that the agent generally does not issue the invoices, bill or challan or any other documents. Learned counsel further submitted that written agreement does not mean that there was no agreement. A verbal agreement was also an agreement which was confirmed from the fact that the payment was through banking channel.
3.1 Learned counsel further submitted that due to clerical mistake the commission amount was not mentioned on some of the shipping bills, however there was no dispute that the commission had been paid on such shipping bills to the overseas agent. There was also no dispute that the appellant had filed EXP-1 and EXP-2 return as prescribed under Notification No.18/2009. Learned counsel contended that it was a procedural lapse on the part of the appellant that in few cases the commission amount was not written in the shipping bill. However, the benefit should not be denied on such procedural lapses. In support of her submissions, learned counsel relied upon the following decisions:-
4
Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 Prachi Leathers Pvt. Ltd. vs CCE 2 Globe India Ltd. vs CCE3 Frisco Foods Pvt. Ltd. vs CCE4 She submitted that otherwise also this was revenue neutral situation as the appellant was entitled for cenvat credit of the service tax paid on the commission paid to the agent.
3.2. Learned counsel further submitted that in the show cause notice dt. 21.03.2011, the period in dispute is October 2009 to March 2010.
In the show cause notice dt.03.08.2011, the period in dispute is April 2010 to September 2010. She submitted that both the show cause notices are partly time barred, and emphasised that there was no allegation of suppression in the show cause notices for invoking larger period as prescribed in proviso to Section 73. Learned counsel contended that in so far as show cause notice dt. 03.08.2011 was concerned, all the facts were in the knowledge of the department as the earlier show cause notice dt. 21.03.2011 had been issued for the period October 2009 to March 2010. In support of her submission, she relied upon the decision of the Tribunal in the case of M/s LG Electronics India Pvt. Ltd. vs CCE5. Learned counsel also submitted that the demand confirmed in both the appeals was not sustainable. The appellant is also not liable to pay interest and the penalty imposed is liable to be set aside. In view of the submissions made above as well as in the appeal memo, the impugned order passed by 2 Final Order Nos. 70219-70220/2024 dt.22.04.2024 3 Final Order No. FO/76484/2018 dt.30.07.2018 4 2021 (11) TMI 428-CESTAT New Delhi 5 Final Order No. 70166/2024 dt.03.04.2024 5 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 the Commissioner (Appeals), confirming demand along with interest and imposing penalty was liable to be set aside.
4. Learned Authorized Representative for the Department while reiterating the findings of the impugned order, submitted that to claim exemption of service tax, the appellant must comply with all the conditions prescribed under the said Notification. As regards the penalty imposed under Section 76 of the Finance Act, he submitted that it was mandatory penalty and there was no requirement to prove mens rea for imposing such penalty under Section 76 of the Finance Act, 1994. In view of the above, learned Authorized Representative prayed that present appeal may be dismissed.
5. We have heard the learned Counsel for the appellant and the learned Authorized Representative for the Department. The issue before us is whether the appellant is eligible for the benefit of the notification no. 18/2009-ST dated 07.07.2009 on the Commission paid to the Agent located outside the taxable territory.
6. In order to appreciate the facts and the submissions, it would be imperative to go through the notification and its conditions. Notification no. 18/2009-ST is reproduced hereinafter:
Not. No. 18/2009-ST "G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service received by an exporter of goods (hereinafter referred to as the exporter) and used for export of goods (hereinafter referred to as the said goods), of the description specified in column (3) of the Table below (hereinafter referred to as the specified service), pertaining to sub-clauses of 6 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 clause (105) of section 65 of the said Act specified in the corresponding entry in column (2) of the said Table, from the whole of the service tax leviable thereon under section 66 and section 66A of the said Act, subject to the conditions specified in column (4) of the said Table, namely:-
Table Sl. No. Sub- Description of taxable Conditions clause service 1 (zzp) Service provided to an The exporter exporter for transport of shall have to the said goods by road produce the from any container freight consignment station or inland container note, by depot to the port or whatever name airport, as the case may called, issued be, from where the goods in his name.
are exported; or Service provided to an exporter in relation to transport of said goods by road directly from their place of removal, to an inland container depot, a container freight station, a port or airport, as the case may be, from where the goods are exported.
2 (zzb) Service provided by a (1)The commission agent located exporter shall outside India and engaged declare the under a contract or amount of agreement or any other commission document by the exporter paid or in India, to act on behalf of payable to the exporter, to cause sale the of goods exported by him. commission 7 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 agent in the shipping bill or bill of export, as the case may be.
(2) The
exemption shall
be limited to
one per cent of
the free on-
board value of
export goods
for which the
said service
has been used.
(3) The
exemption shall
not be available
on the export
of canalised
item, project
export, or
export financed
under lines of
credit extended
by Government
of India or
EXIM Bank, or
export made by
Indian partner
in a company
with equity
participation in
an overseas
joint venture or
8
Service Tax Appeal No. 50708 Of 2019
Service Tax Appeal No. 50709 Of 2019
wholly owned
subsidiary.
(4) The
exporter shall
submit with the
half yearly
return after
certification of
the same as
specified in
clause (g) of
the proviso-
(i) the
original
documents
showing
actual
payment of
commission
to the
commission
agent; and
(ii) a copy of
the
agreement or
contract
entered into
between the
commission
agent located
outside India
and the
exporter in
relation to
sale of export
9
Service Tax Appeal No. 50708 Of 2019
Service Tax Appeal No. 50709 Of 2019
goods,
outside India:
Provided that-
(a) the exemption shall be available to an exporter who,-
(i) informs the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, having jurisdiction over the factory or the regional office or the head office, as the case may be, in Form EXP1, before availing the said exemption;
(ii) is registered with an export promotion council sponsored by the Ministry of Commerce or the Ministry of Textiles, as the case may be;
(iii) is a holder of Import-Export Code Number;
(iv) is registered under section 69 of the said Act;
(v) is liable to pay service tax under sub-section (2) of section 68 of said Act, read with sub-clause (iv) or sub-clause (v) of clause
(d) of sub-rule (1) of rule 2 of the Service Tax Rules,1994, for the specified service; (b) the invoice, bill or challan, or any other document issued by the service provider to the exporter, on which the exporter intend to avail exemption, shall be issued in the name of the exporter, showing that the exporter is liable to pay the service tax in terms of item (v) of clause (a); (c) the exporter availing the exemption shall file the return in Form EXP2 every six months of the financial year, within fifteen days of the completion of the said six months; (d) the exporter shall submit with the half yearly return, after certification, the documents in 10 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 original specified in clause (b) and the certified copies of the documents specified in column (4) of the said Table;
(e) the documents enclosed with the return shall contain a certification from the exporter or the authorised person, to the effect that taxable service to which the document pertains, has been received and used for export of goods by mentioning the specific shipping bill number on the said document.
(f) where the exporter is a proprietorship concern or partnership firm, the documents enclosed with the return shall be certified by the exporter himself and where the exporter is a limited company, the documents enclosed with the return shall be certified by the person authorised by the Board of Directors;
(g) where the amount of service tax in respect of the service specified against serial No. 2 of the Table exceeds one per cent. of the free on-board value of the export then, the amount in excess of the said one per cent. shall be paid within the period specified under rule 6 of the Service Tax Rules, 1994; [F.No.341/15/2007-TRU] (Prashant Kumar) Under Secretary to the Government of India"
7. A perusal of the aforesaid notification read with the conditions and the Form EXP-2 reveals that an exporter, to claim exemption from service tax, has to file the documents in original viz, the consignment note issued in his name, the invoice, bill or challan, or any other document issued by the service provider to the exporter, on which the exporter intended to avail exemption specified in clause (b) and the certified copies of the documents specified in column (4) of the said 11 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 Table. In the instant case, we find that the original adjudicating authority and the Commissioner (Appeals) have denied the exemption as the appellant did not produce the original documents viz., consignment note in his name/invoices/bills/challans issued to the Commission agent, copy of the agreement or contract with the Commission agent. It is an admitted fact that the shipping bills also did not incorporate the commission amount as required under the notification.
8. In this context, the Ld Counsel submitted that the appellant did not enter into any written agreement or contract with the Commission agent and there was merely an oral agreement between them. The non-mentioning of the commission amount on the Shipping Bills was a clerical error. It has also been submitted before us that the appellant had filed EXP-1 & EXP-2 as required under the said notification.
9. We note that in the main body of the said notification, the following conditions are critical to avail the said exemption which are as follows:
(1)The exporter shall declare the amount of commission paid or payable to the commission agent in the shipping bill or bill of export, as the case may be.
4(i) the original documents showing actual payment of commission to the commission agent; and
(ii) a copy of the agreement or contract entered into between the commission agent located outside India and the exporter in relation to sale of export goods, outside India:
10. In the instant case, it has been submitted before us that the appellant had entered into an Oral Agreement with the Commission 12 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 agent based abroad. It was also submitted that non-mention of the commission amount on the Shipping Bills was a clerical error. Ld. Counsel also submitted that payments were made through Banking channel only. We are unable to agree with the contentions of the Ld Counsel. The conditions mentioned are an integral part of the requirements for availing the benefit of exemption under the said notification. The same cannot be wished away as mere procedural requirements. The bare perusal of this notification also clarifies that the exemption to taxable service received by an exporter of goods and used for export of goods from the commission agent located outside India is subject to several conditions as mentioned in the notification.
Apparently and admittedly, all the above said conditions have not been complied with by the appellants as required. Mere filing of EXP-1 & EXP-2 does not satisfy the essential conditions of the Notification. Hence the appellant is not entitled for the benefit of exemption claimed on the Commission amount paid to the commission agent located abroad. We find support in the Tribunal‟s decision in the case of Bhaskar Industries Private Limited vs Bhopal6.
"5.6 The bare perusal of this notification also clarifies that the exemption to taxable service received by an exporter of goods and used for export of goods from the commission agent located outside India is subject to several conditions as mentioned in the notification. Apparently and admittedly, all the above said conditions have not been complied with by the appellants as the return in form EXP-4 were not filed as required. Hence the 6 Service Tax Appeal No. 51763 of 2017, vide Final Order 51204/2025 dated 21 August, 2025 13 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 appellant was not entitled for the benefit of this notification as well."
11. Further, we find that the Constitution Bench of the Supreme Court in its judgment dated 30.07.2018 in the case of Commissioner of Customs vs Dilip Kumar and Company7 held that every taxing statue including, charging, computation and exemption clause should be interpreted strictly. Further, in case of ambiguity in an exemption provision, benefit must go to the Revenue. Thus, the „burden of proof‟ is upon the taxpayer claiming the benefit of exemption or exception clause to prove the applicability of such exemption. The relevant paras are reproduced hereinafter for ease of reference: -
"52. To sum up, we answer the reference holding as under (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands over-ruled.
53. The instant civil appeal may now be placed before appropriate Bench for considering the case on 7 [AIR 2018 Supreme Court 3607] 14 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 merits after obtaining orders from the Hon'ble Chief Justice of India."
12. In view of the categorical judgment of the Apex Court, we hold that the appellant was not eligible for the benefit under Notification No. 18/2009- ST dated 07.07.2009.
13. We now take up the submissions of the ld counsel regarding the time barred demand. Ld Counsel submitted that the show cause notices did not invoke the extended period and hence part of the demand stands time barred. We note that the said notice is dated 21.3.2011 wherein demand has been raised for the period October 2009-March, 2010 under section 73 of the Finance Act, 1994. Similarly, for April 2010 to September 2010, the show cause notice was issued on 03.08.2011. During the relevant period, it is seen that that the demand for the normal period could be raised within 1 year of the relevant date. Relevant date as per Section 73(6) provides what is the relevant date for the purpose of issuing show cause notice which is as follows-
in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid- where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
15
Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 in any other case, the date on which the service tax is to be paid under this Chapter or the rules made there under;
in a case where the service tax is provisionally assessed under this Chapter or the rules made there under, the date of adjustment of the service tax after the final assessment thereof;
in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.
14. In the instant case, we note that the Notification 18/2009-ST in clause (c) of the conditions prescribes that the return i.e., EXP-2 is to be filed every six months within 15 days of the completion of the said six months. In the instant case, the period of demand was from October, 2009 to March, 2010 for which the said EXP-2 would have to be filed within 15 days i.e., by April 15, 2010. The demand notice had to be issued within one year from the relevant date, which in the instant case would be 14, April 2011. As the said notice was issued on 21.3.2011, which falls well within the normal period of demand, hence the demand under Section 73 is upheld. Similarly, in respect of show cause notice dated 03.08.2011, we note that the period involved is from April 2010 to September 2010, wherein the EXP-2 had to be filed by 15.10.2010. The clock for one year would start ticking from 16.10.2010 and end on 15.10.2011, whereas the show cause notice was issued on 03.08.2011. Consequently, we hold that both the notices were issued well within time, and the demand is not time barred.
15. As regards interest, we note that Supreme Court in the case of Pratibha Processors & Ors vs Union of India & Ors8 has held that 8 [AIR 1997 SUPREME COURT 138] 16 Service Tax Appeal No. 50708 Of 2019 Service Tax Appeal No. 50709 Of 2019 "Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable." Accordingly, the demand for interest is also upheld.
16. However, as the issue relates to export benefit, we set aside the penalty imposed on the appellant under section 76 of the Finance Act, 1994.
17. In view of the above discussions we hold as follows:
(i) The demand of service tax on Commission paid to Commission agent is upheld along with interest.
(ii) Penalty under section 76 is set aside.
18. Consequently, the impugned order stands modified accordingly and the appeals are allowed to the extent indicated above.
(Order pronounced in the open Court on 26.09.2025) (BINU TAMTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) G.Y.