Exemption under Notification No 42/2012 ST - An unwanted condition?
NOTIFICATION No dated 29th June 2012 exempts service tax payable on the service provided by a commission agent located outside India and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him.Unlike other exemption Notifications like 52/2011 ST dated 30.12.2011 (earlier version 17/2009 ST dated 07.07.2009), this exemption does not operate through refund procedure, i.e., the person availing the exemption shall first pay the service tax and then claim refund of the same. Notification ST dated 29th June 2012 has a peculiar condition. The assessee has to give a declaration in Form EXP 4 to the jurisdictional Assistant / Deputy Commissioner and Sl No 9(iii) of the Declaration reads as under:
(iii) no CENVAT credit of service tax paid on the specified service used for export of said goods taken under the CENVAT Credit Rules, 2004;
The service tax on the commission paid to the agents located outside India is payable by the receiver of the service (Exporter) under Section 68(2) of the Finance Act, 1994. When the service tax is exempted, the Exporter will not pay any service tax under reverse charge and the question of taking CENVAT Credit does not arise. Hence this condition appears to be totally irrelevant.This condition is understandable for notifications operating through refund route as there is a possibility of claiming refund as well as taking CENVAT Credit. For Notifications like 42/2012 ST, this condition makes no sense.
Further, the exemption is only upto the extent of 10% of the FOB value of goods exported. If the commission paid is in excess of 10% of the FOB, the exporter has to pay service tax on the amount paid in excess of 10%. In such cases, there is no reason why the exporter should be denied the CENVAT Credit of service tax paid on the commission in excess of 10%.
Interestingly, this condition appears to be a copy paste error continued for a long time. In Notification dated 29th June 2012, the declaration appears as Sl No 9 after Sl.No 9 ( Details of Bank account), The earlier Notification No 18/2009-S.T., Dated: July 7, 2009 also had a similar condition at Sl No 9(iii). Even in Notification also, Sl No 9 ( Declaration) appears after Sl No 9 ( Details of bank account).