No Service Tax on Commission Deducted by Foreign Buyers in Export Transactions Lacking Agent Relationship: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that service tax is not applicable on commission amounts that are deducted by foreign buyers from the payment for exported goods. The tribunal clarified that this is valid when there is no formal principal-agent relationship between the Indian exporter and the entity receiving the commission. The case involved an exporter whose overseas buyers deducted a commission from the sale proceeds. The service tax department sought to levy tax on this commission, treating it as a service received by the exporter. However, the CESTAT found no evidence of a service agreement or an agent relationship. It concluded that the deduction was merely a part of the trade arrangement and did not constitute an import of service by the Indian exporter, thereby setting aside the demand for service tax.