2013 (7) TMI 820 - AT - Service Tax

Export of Service - Business Auxiliary Services assessee provided facilitation of importation of goods into India - Held that - Relying upon the judgement of Paul Merchants Ltd. vs. CCE, 2012 (12) TMI 424 - CESTAT, DELHI (LB) , A service provided by an agent or subagent in India to intended beneficiaries of an overseas company is service provided to a foreign company and not to the recipient of the goods or services provided by the foreign company and that the same must be treated as export of service - Export of services are to be determined strictly with reference to provisions of the 2005 Rules and not by any subjective assumption of what constitute export - On analysis of Rule 3(1)(iii) of the 2005 Rules. - prima facie case is in favor of assessee - stay granted. Regarding reversal of cenvat credit - petitioner /appellant directed to remit Rs. 7 lakhs.

Summary

Issues:
Assessment of service tax liability, reversal of cenvat credit, claim for immunity under Export of Service Rules, 2005, determination of export of services, waiver of pre-deposit and stay of proceedings.

Assessment of Service Tax Liability:
The appeal was filed against an adjudication order assessing a service tax liability of Rs.11,54,25,700 along with interest and penalties. The services provided by the assessee to its parent company were considered as Business Auxiliary Service, a taxable service. The claim for immunity under Rule 3(1)(iii) of the Export of Service Rules, 2005, was rejected by the adjudication order.

Reversal of Cenvat Credit:
The adjudication order confirmed the recovery of cenvat credit and directed the reversal of Rs. 25,53,340. The tribunal noted that the balance liability after remittance was around Rs. 7 lakhs. The legality of this reversal would be determined at the final hearing of the appeal.

Claim for Immunity under Export of Service Rules, 2005:
The petitioner's claim for immunity to service tax under Rule 3(1)(iii) of the Export of Service Rules, 2005, was based on the argument that the services provided were for a foreign principal and should be treated as export of service. The adjudicating authority, however, concluded that the services facilitated marketing and sales support in India, thus not qualifying for exemption.

Determination of Export of Services:
The tribunal referred to a previous judgment in Paul Merchants Ltd. vs. CCE, Chandigarh, which held that the determination of export of services under the 2005 Rules should be based on the rules themselves, not subjective assumptions. It was emphasized that services provided to a foreign company should be treated as export of service, and the place of consumption, not performance, should be considered for determining the destination of services.

Waiver of Pre-deposit and Stay of Proceedings:
Considering the prima facie unsustainability of the assessment and levy of service tax, the tribunal granted a waiver of pre-deposit and stayed further proceedings pending the appeal. The appellant was required to remit Rs. 7 lakhs within a specified time frame, failing which the appeal would be rejected for non-compliance.

This detailed analysis of the judgment highlights the key issues involved and the tribunal's considerations and decisions concerning the assessment of service tax liability, reversal of cenvat credit, claim for immunity under the Export of Service Rules, determination of export of services, and the waiver of pre-deposit and stay of proceedings.