2013 (12) TMI 622 - AT - Service Tax

Waiver of pre-deposit of service tax - Marketing and sale promotion of the firm outside India - Held that - Board issued a clarification vide Circular dt.24.1.2009 where it has been clarified that it is possible 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. In view of the above circular, prima facie we find that the applicant has a strong case in their favour. Therefore, the pre-deposit of dues are waived and recovery of the same is stayed during the pendency of the appeal - Commissioner (Appeals) dismissed the appeal for non-compliance to the conditions of the stay order. Hence, the impugned order is set aside and the matter is remanded to the Commissioner (Appeals) to decide the appeal on merits - Stay granted.

Summary

Issues:
1. Whether the activity undertaken by the applicant constitutes export of service under Rule 4 of the Export of Services Rules 2005.
2. Whether the appellant complied with the conditions of the stay order under Section 35F of the Central Excise Act.

Analysis:

Issue 1: The applicant sought waiver of pre-deposit of service tax, interest, and penalty amounting to Rs. 15,32,682 for marketing and sale promotion activities conducted outside India, specifically in Singapore. The adjudicating authority determined that since the performance of the service occurred within India, it did not qualify as an export of service as per Rule 4 of the Export of Services Rules 2005.

Issue 2: The appellant appealed against the adjudication order and requested a waiver of dues. However, the Commissioner (Appeal) mandated the deposit of the service tax amount for the appeal hearing. Due to the appellant's failure to comply with the stay order conditions, the appeal was dismissed for non-compliance with Section 35F of the Central Excise Act.

Upon review, the appellant referenced Board Circular No.111/05/2009-ST, which clarified that services provided by Indian agents for marketing goods of foreign sellers in India, with benefits accruing outside India, should be treated as export of service. The appellant argued that based on this circular, the demand was not sustainable.

In response, the revenue supported the lower authority's decision, emphasizing that the applicant's activities were conducted within India and did not align with the criteria for export under Rule 3 of the Export of Services Rules 2005.

The Tribunal considered a prior Board circular issued on 24.1.2009, which indicated that services could still qualify as exports even if activities occurred in India, as long as the benefits were realized outside India. Consequently, the Tribunal found merit in the appellant's case, waiving the pre-deposit of dues and staying the recovery during the appeal's pendency.

Given the dismissal of the appeal for non-compliance with the stay order conditions, the Tribunal set aside the impugned order. The matter was remanded to the Commissioner (Appeals) to decide on the appeal's merits without requiring any pre-deposit and after providing the appellant with a hearing opportunity. Thus, the appeal was disposed of through remand.