2016 (12) TMI 1700 - AT - Service Tax

Liability of service tax - sales promotion and product awareness activities - benefit of export of services - Held that - Admittedly, the appellants are rendering service in terms of agreement with the U.S. Company and receiving consideration from that company in convertible foreign exchange. The promotional activities are being carried out in India. The beneficiary being foreign entity, who makes the payment towards such services to the appellant - the Tribunal in the case of M/s. Microsoft Corporation (I) (P) Ltd. Versus CST. New Delhi 2014 (10) TMI 200 - CESTAT NEW DELHI (LB) considered similar situation and held that the criteria for export of service is fulfilled in such situation and tax liability does not arise - appeal allowed - decided in favor of appellant.

Summary

Issues: Tax liability on promotional activities for American Express Travelers Cheque in India.

Analysis:
1. Issue of Tax Liability: The appeal challenged the order of the Commissioner of Central Excise regarding the tax liability of the appellants engaged in sales promotion and product awareness activities for American Express Travelers Cheque in India. The dispute centered around whether the services rendered in India qualified for the benefit of export of services, as claimed by the appellants, or if they were subject to tax as contended by the Department.

2. Export of Services Conditions: The appellant argued that all conditions for export of services were met, including the recipient of service being located outside India, the amount received in convertible foreign exchange, and the services intended for a person outside India. Citing the decision in Microsoft Corporation of India Pvt. Ltd., the appellant asserted that since the promotional activities were for a foreign entity and payment was received in foreign exchange, no tax liability should arise.

3. Department's Contention: The Department, represented by the ld. A.R., supported the findings of the lower authorities regarding the tax liability on the promotional activities carried out by the appellants in India for American Express Travelers Cheque.

4. Tribunal's Decision: After hearing both sides and examining the appeal records, the Tribunal noted that the appellants were providing services under an agreement with a U.S. company, receiving payment in convertible foreign exchange, and conducting promotional activities in India for a foreign entity. Relying on the precedent set in Microsoft Corporation case, the Tribunal concluded that the criteria for export of service were met in the present situation, leading to the absence of tax liability. Consequently, the impugned order was set aside, and the appeal was allowed, emphasizing that the promotional activities qualified as export of services.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's decision based on the fulfillment of export of services conditions in the context of promotional activities for American Express Travelers Cheque in India.