2014 (11) TMI 168 - AT - Service Tax

Scope of Business Auxiliary Service - data processing activities - whether promotion or marketing of a service provided by the client; or any customer care service provided on behalf of the client, employing information technology service (including computer data processing) would fall outside the scope of BAS - Held that - services provided by assessees to the overseas entities (Amadeus/Galileo) clearly amount to promotion or marketing of CRS services of the overseas entities (a BAS), but nevertheless falls outside the ambit of BAS as defined, since these services were provided by employing computer data processing, excluded component. Assessees promote/market CRS services provided by the overseas entities (Amadeus/Galileo) but do so through computer data processing, amounting to Information Technology Service, an excluded component of BAS, defined in Section 65(19) of the Act. - assessees promote/market CRS services provided by the overseas entities (Amadeus/Galileo) but do so through computer data processing, amounting to Information Technology Service, an excluded component of BAS, defined in Section 65(19) of the Act. Export of Services - whether services provided by assessees amount to export of services, within the ambit of the 2005 Rules - Held that - where the service recipient is located outside India, this taxable service is delivered and used outside India; and payment for such service provided outside India is received by the Indian service provider in convertible foreign exchange, the service falls within the ambit of the 2005 Rules; and is admissible to benefits thereunder. The decision of the Larger Bench in Paul Merchants Ltd. (2012 (12) TMI 424 - CESTAT, DELHI (LB)), particularly in the context of the facts on the basis of which the said decision was pronounced, explain the scope of relevant provisions of the 2005 Rules. From the decisions referred to supra it is clear that activities of assessees fall within the scope of the 2005 Rules. Consequently, there is no liability to Service tax. From 01.07,2003 till introduction of the 2005 Rules also, BAS which was exported and for consideration received in convertible foreign exchange is exempted from liability to service tax by Notification No 6/1999-ST, Notification No. 21/2003-ST and in view of the clarification issued in Board Circular No. 56/5/2003-ST dated 25.04.2003. Extended period of limitation - Held that - For dropping levy of service tax demand on services provided during the period covered by the extended period of limitation and for deleting penalty under Section 78, the adjudicating Authority recorded elaborate and cogent reasons duly analyzing the material on record and concluded that relevant information and particulars were furnished and was available with the Department much in advance and therefore suppression of material facts or intent to evade tax by the assessees, cannot be inferred. We concur with these conclusions recorded by the adjudicating Authority. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the activities of the assessees fall under the ambit of Business Auxiliary Service (BAS) during the relevant periods.
2. Whether the services provided by the assessees amount to export of services under the Export of Service Rules, 2005.
3. Whether the extended period of limitation for service tax demand and penalties under Section 78 is applicable.

Issue-Wise Detailed Analysis:

1. Applicability of BAS:
- Assessee's Activities and BAS:
The assessees, Amadeus India Pvt. Ltd. and Acquire Services Pvt. Ltd., were engaged in activities involving data processing and providing access to Computer Reservation System (CRS) services of foreign entities (Amadeus and Galileo). The adjudicating authority initially held that these activities fell under BAS as they involved marketing and promotion of CRS services. However, the Tribunal concluded that the assessees' activities, involving computer data processing, were excluded from BAS under Section 65(19) of the Finance Act, 1994, until 01.05.2006, due to the exclusionary clause for information technology services, including computer data processing.

2. Export of Services:
- Export of Service Rules, 2005:
The Tribunal analyzed whether the services provided by the assessees amounted to export of services. The assessees contended that they received payment in convertible foreign exchange from foreign entities for services rendered, which should be exempt under the Export of Service Rules, 2005. The Tribunal referred to the Larger Bench decision in Paul Merchants Ltd. v. CCE and other related cases, which clarified that services provided to a recipient located outside India, used outside India, and paid for in convertible foreign exchange, qualify as export of services. Consequently, the Tribunal held that the assessees' services fell within the ambit of the Export of Service Rules, 2005, and were exempt from service tax.

3. Extended Period of Limitation and Penalties:
- Adjudicating Authority's Findings:
The adjudicating authority had dropped the demand for service tax for the extended period and penalties under Section 78, citing that the relevant information was disclosed to the authorities, and there was no suppression of facts or intent to evade tax. The Tribunal concurred with this conclusion, noting that the assessees had a bona fide belief regarding their tax liability and that there was no deliberate suppression of material facts. Therefore, the extended period of limitation and penalties under Section 78 were not applicable.

Conclusion:
The Tribunal allowed the appeals of the assessees (Service Tax Appeal Nos. 824 and 841 of 2010) and dismissed the appeals of the Revenue (Service Tax Appeal Nos. 934 and 946 of 2010). The orders-in-original dated 30.03.2010, passed by the Commissioner, Central Excise (Adjudication), New Delhi, were quashed. The Tribunal held that the services provided by the assessees during 01.07.2003 to 01.05.2006 fell outside the ambit of BAS and that the assessees were entitled to benefits under the Export of Service Rules, 2005, for the entire periods in issue.