Recently, in case of “Zaheerkhan B. Khan Versus the Commissioner of Service Tax, Mumbai (2013) 34 taxmann.com 66 (Mumbai – CESTAT)” Honorable Mumbai CESTAT held that since definition of assessee includes agent, therefore, Service tax liability discharged by agent shall be considered as liability discharged by Service provider himself. Where service tax liability of service provider had been discharged by his agent, service tax could not be demanded from service provider. Thus, Demand raised against assessee was set aside.
Further, the following points are also notable:
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Assessee himself liable, if agent has not properly discharged liability: This judgment shows that a service provider may shift his service tax liability by appointing an agent and legal compliance by such agent would be sufficient for the purposes of the Act. But, any insufficient compliance may lead to demand of tax, with interest, fines and penalties where for the service provider himself shall be liable.
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Filing of return by agent: As per rule 7 of the Service Tax Rules, 1994, return is to be filed by assessee i.e., an agent may also file return on behalf of principal. In that case, returns must be filed in the name of and on behalf of the assessee (here, Mr. Zahir Khan), which was a mandatory requirement. Whether this requirement was complied with doesn't come out of this judgment.
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Services provided by agent to assessee: Agent had retained commission. Such commission was liable to service tax. The issue of levy of service tax on such commission had not been raised in this judgment.
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Service provider may be appointed as agent by service recipient to discharge tax liability under reverse charge: This judgment can be applied conversely where the service recipient shifts his liability to pay service tax under reverse charge on the service provider under an agreement. The Department gets its due share of revenue in that case too.
