Whether sub agents of Western Union Money Transfer leviable to service tax under BAS?

PJ/CASE LAW/2015-16/2613

Case:- COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH Versus ASHU FOREX PVT. LTD.

Citation:-2014 (35) S.T.R. 776 (Tri. - Del.)

Brief facts:-This appeal is filed by Revenue against the Order-in-Appeal No. 421/CE/CHD/2008, dated 12-8-2008 passed by the Commissioner (Appeals), Central Excise, Chandigarh.
Brief facts of the case are that M/s. Ashu Forex Pvt. Ltd. (hereinafter referred to as respondents) are working as sub-agent of M/s. AFL Mumbai who in turn are working as principal representative of Western Union Money Transfer Services, Ireland. Respondents are rendering the services of paying money to the designated recipient on behalf of Wall Street Finance Ltd. and are helping in transferring Foreign Exchange to the Indian recipient. Department is of the view that activity of respondent is covered under the category of “Business Auxiliary Service” and accordingly the Show Cause Notice dated 30-4-2007 was issued to the respondent demanding service tax amounting Rs. 57,404/- along with interest and also proposing penalties under Sections 76, 77 and 78 of the Finance Act. Show Cause Notice was adjudicated by Assistant Commissioner vide Order-in-Original No. 79/2007, dated 22-2-2008 confirming the service tax amount along with interest and also imposing penalty equal to the tax both under Sections 76, 78 of the Act and also imposing of Rs. 1000/- under Section 77 of the Act. This order was challenged by the respondents before the Commissioner (Appeals) Customs, Central Excise, Chandigarh who vide the impugned order set aside the Order-in-Original and allowed the party’s appeal. Revenue has challenged the impugned order in the present appeal.

Appellant’s contention:- Ld. DR appearing for the Revenue submitted that order passedby the Commissioner (Appeals) is not proper and legal in holding thatactivities of the respondent do fall under the category of“Business Auxiliary Service”. He submits that as per terms andconditions of the agreement the activities by the respondent are notlimited to delivery of the money to the ultimate beneficiary but arealso extended to advertise and promotion of the money transferservice. By advertisement and promotion of money transfer theypromote the Western Union and such activity clearly falls under“Business Auxiliary Service.” Therefore Commissioner (Appeals) hasnot appreciated the activities of the respondent in properperspective and allowed the appeal filed by the respondent and the order passed by the Commissioner (Appeals) is therefore needs to be set aside.

Respondent’s contention:-None appeared for the respondent despite notice.

Reasoning of judgement:- They find that the respondents are working sub-agent of M/s. AFL Ltd., Mumbai who in turn work as a principal representative of M/s. Western Union. The main function of the respondents is delivery of money to the ultimate beneficiary in India as per directions given by their principal representative for which the respondents get commission. The issue before them is whether the activity is liable to service tax under Section 65(19) of the Finance Act, 1994.
The issue came for decision before this Tribunal and the Tribunal in case of Paul Merchants Ltd. reported in 2013 (29)S.T.R.257 (Tri.-Del.)by majority decision has held that advertisement andsale promotion by agent/sub-agent is to be treated as export of the service and therefore not liable to the service tax. Following the said decision they are of the view that activity undertaken by the respondents are not liable to service tax being the export of service. Accordingly they uphold the Order-in-Appeal and reject the Revenue’s appeal.

Decision:-Appeal rejected.

Comment:- The crux of the case is that relying on the decision given in the case of Paul Merchants Ltd., advertisement andsale promotion by agent/sub-agent of Western Union Money Transfers is to be treated as export of the service. Hence agent/sub agent is not liable to pay service tax on the commission earned for disbursing money to the ultimate beneficiary on the directions of its principal as the said service is treated as export of service.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2613

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