2010 (10) TMI 801 - AT - Service Tax

Service tax under Banking and other Financial Services - appellants branches were not registered for payment of service tax under the category of business auxiliary services though they were providing the said services Held that - export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India. It is an admitted fact that the benefits of the services rendered by the appellant are accrued to a person who is situated outside India and to Western Union who is also situated outside India Accordingly in view of the detailed order given by this Bench in the case of Muthoot Fincorp Ltd. (2009 -TMI - 75389 - CESTAT BANGALORE) and facts in the current case being identical as in that case the impugned order is liable to be set aside and we do so. The impugned order is set aside and appeal is allowed

Summary

Issues:
1. Whether the appellants were liable to pay service tax under the category of business auxiliary services for providing services to M/s. Paul Merchants Ltd. and M/s. Western Union Financial Services Inc.
2. Whether the activities of the appellants fell under the definition of business auxiliary services.
3. Whether the benefits of the services provided by the appellants accrued outside India.

Analysis:
Issue 1:
The appeal challenged the order demanding service tax, education cess, interest, and penalties imposed on the appellants for providing business auxiliary services to M/s. Paul Merchants Ltd. and M/s. Western Union Financial Services Inc. The lower authorities confirmed the demand, interest, and penalties. The Commissioner (Appeals) upheld the order-in-original, leading the appellants to appeal before the Tribunal.

Issue 2:
The appellants argued that their activities did not constitute business auxiliary services as they had a contractual obligation with M/s. Paul Merchants Ltd., who had an agreement with M/s. Western Union Financial Services Inc. The appellants did not charge any amount from Indian claimants and shared a commission received from M/s. Western Union. The department contended that the appellants were providing services to Western Union and the services fell under the category of business auxiliary services.

Issue 3:
The Tribunal analyzed the agreements between the parties and found that the services provided by the appellants benefited Western Union, which was situated outside India. The Tribunal referred to a previous judgment involving similar contractual arrangements and held that the benefits of the services accrued outside India, aligning with the CBEC circular clarifying the applicability of Export of Service Rules, 2005. The Tribunal concluded that the facts of the case were identical to the previous judgment, and therefore, set aside the impugned order, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the demand for service tax, interest, and penalties, as the services provided were found to benefit entities situated outside India, aligning with previous judgments and relevant circulars.