2014 (4) TMI 326 - AT - Service Tax

Waiver of pre-deposit of service tax - Export of services or not - Business Auxiliary Service - Agreement for promotion and marketing of spares and accessories manufactured and supplied by the Singapore firm as well as for promotion and marketing, technical support, sales promotion of CNC machines, spares and accessories and installation and commissioning of CNC machines manufactured and marketed by the Singapore firm - Held that - as per terms and conditions of the Agreement applicants undertake the sale and promotion of goods manufactured and supplied by the Singapore firm in India and the applicants undertake the activity of technical requirement of Indian customers, assisting the customers in providing an understanding of the various spares supplied by the Singapore firm. In addition to this, as per the Agreement applicants also to undertake the activity of assisting in evaluating the creditworthiness of potential customers in India. Activities undertaken by the applicant under the Agreement for promotion and marketing of spare parts, obligation of collection of receivables etc. in India, hence it cannot be said that the service is used outside India - applicants have not made out a case for total waiver of the pre-deposit of the service tax - stay granted partly.

Summary

Issues:
1. Whether the demand for service tax, interest, and penalty should be waived based on the nature of services provided.
2. Whether the services provided by the applicant to a foreign firm qualify as export of service under the Export of Services Rules, 2005.
3. Whether the demand is beyond the normal period of limitation.
4. Whether the activities undertaken by the applicant can be considered as used outside India for the purpose of service tax liability.

Analysis:
1. The applicant sought a waiver of pre-deposit of service tax, interest, and penalty amounting to Rs.1,87,72,186. The demand was confirmed due to the provision of Business Auxiliary Service to a foreign firm. The applicant argued that the services provided fall under the Export of Services Rules, 2005, and cited relevant Tribunal decisions in their favor. The Revenue, however, relied on previous rulings and circulars to support the demand, stating it does not warrant a total waiver of pre-deposit.

2. The Tribunal examined the Agreements between the applicant and the foreign firm, focusing on the nature of services provided. While some activities were related to installation and commissioning of machines, other activities such as sales promotion, technical support, and evaluation of creditworthiness of customers were also undertaken. The Tribunal noted that certain services were performed in India, indicating that they were not entirely used outside India, thus impacting the export of service classification.

3. The applicant contended that if a subsequent circular is clarificatory, the demand would be beyond the normal period of limitation. The Tribunal acknowledged this argument but deferred a detailed examination to the final hearing, emphasizing that no financial hardship was pleaded. The issue of limitation was deemed a mixed question of facts and law.

4. Based on the analysis of the Agreements and activities undertaken by the applicant, the Tribunal found that the services provided, including promotion and marketing activities in India, did not entirely qualify as used outside India. Consequently, the Tribunal directed the appellant to deposit 50% of the confirmed service tax amount within eight weeks, with a waiver of pre-deposit for the remaining dues until the appeal hearing, emphasizing compliance reporting by a specified date.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal regarding the demand for service tax waiver, export of services classification, limitation period, and the nature of activities undertaken by the applicant.