2014 (4) TMI 489 - AT - Service Tax

Demand of service tax - Business Auxiliary Service - Export - evaluation of market trends and identification of prospective customers in India for the overseas entity - Held that - Following decision of M/s GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi 2014 (3) TMI 696 - CESTAT NEW DELHI and Paul Merchants Ltd. vs. CCE, Chandigarh 2012 (12) TMI 424 - CESTAT, DELHI (LB) - Decided in favour of assessee.

Summary

Issues:
Service tax demand for providing Business Auxiliary Service to an overseas entity, applicability of Export of Service Rules, 2005, interpretation of precedents, binding nature of tribunal decisions on revenue authorities.

Analysis:
The case involved a service tax demand of Rs. 72,43,736/- on the appellant for providing Business Auxiliary Service to an overseas corporate entity. The appellant, referred to as AMIL, provided services to the entity under an agreement which included market evaluation and customer identification services. The agreement explicitly stated that AMIL was not authorized to collect payments from customers on behalf of the foreign entity, and the goods would be directly supplied by the overseas entity to the customers. The dispute arose when the revenue authorities alleged that the services provided by AMIL constituted Business Auxiliary Service, leading to the demand for service tax.

AMIL contended that the services provided amounted to the export of service under the Export of Service Rules, 2005, as the services were utilized by the recipient outside India, consideration was received in convertible foreign exchange, and thus, exempt from service tax. However, the Adjudicating Authority rejected this defense and confirmed the tax demand along with interest and penalties.

The Tribunal referred to precedents like Paul Merchants Ltd. and GAP International Sourcing (India) Pvt. Ltd. cases, where it was held that transactions falling within the Export of Service Rules, 2005 were not liable for service tax. The Revenue argued against the interpretation of these precedents and a circular issued by the Board, but the Tribunal emphasized the binding nature of its decisions on the Revenue. It stated that decisions of the Tribunal are crucial for jurisprudential stability and economic growth, and the Revenue cannot challenge them unless through appropriate legal channels.

Given the precedents and the nature of services provided by AMIL, the Tribunal found that the impugned order confirming the tax demand could not be sustained. Therefore, the order passed by the Commissioner was quashed, and no costs were awarded. The Tribunal highlighted the importance of respecting its decisions for legal coherence and stability in the economic environment.