2015 (1) TMI 547 - AT - Service Tax

Waiver of pre deposit - Penalty u/s 76, 77 & 78 - appellant has rendered the services to a client situated abroad and has received commission in convertible foreign exchange - export of service in terms of Rule 3(1)(iii) of the Export of Service Rules, 2005 - Held that - Appellant has undertaken business promotion of the principal situated abroad. Therefore, the benefit of the service accrues to the client situated abroad. The place of provision of service is where the service recipient is situated. In the present case, since service recipient is situated abroad, the delivery of the service has taken place outside India. Inasmuch as the consideration is received in convertible foreign exchange, the twin conditions of export, namely the service should be rendered from India and delivered outside India and the payment should be received in convertible foreign exchange are satisfied. Therefore, the activity undertaken by the appellant prima facie, is covered by the provisions of Export of Service Rules, 2005. The decisions of this Tribunal in the case of Paul Merchants case cited 2012 (12) TMI 424 - CESTAT, DELHI (LB) , clearly support the case of the appellant. Thus, the appellant has made out a strong prima facie case for grant of stay. -Unconditional waiver from pre deposit of the dues- Stay granted.

Issues:
Service tax demand confirmation against the appellant, applicability of business auxiliary service tax in India, export of service rules, financial condition of the appellant, grant of stay petition.

Analysis:

1. Service tax demand confirmation against the appellant:
The appeal and stay petition arose from an order confirming a service tax demand of Rs. 15,63,336/- along with interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant, acting as a Commercial Advisor for a Singapore-based company, received a commission for services rendered in India. The department issued a show cause notice demanding service tax, which was upheld in the impugned order.

2. Applicability of business auxiliary service tax in India:
The appellant argued that the services rendered to a client abroad, with commission received in convertible foreign exchange, should be considered export of service under Rule 3(1)(iii) of the Export of Service Rules, 2005. Citing precedents like Paul Merchants Ltd. case, the appellant contended that similar transactions were treated as exports by the Tribunal. The appellant's counsel emphasized that the service recipient being abroad meant the service was delivered outside India, satisfying the conditions for export.

3. Export of service rules:
The Tribunal analyzed the nature of the appellant's services and concluded that since the service recipient was abroad, and the consideration was in convertible foreign exchange, the activity fell under the Export of Service Rules, 2005. Relying on precedents and the specific conditions for export, the Tribunal found that the appellant had a strong prima facie case for the grant of stay.

4. Financial condition of the appellant:
The appellant's counsel highlighted the poor financial condition of the appellant, with consistent losses over the past four years and pressure from debtors for recovery of dues. This aspect was considered in conjunction with the arguments for granting a stay on the tax demand.

5. Grant of stay petition:
After considering submissions from both sides, the Tribunal granted unconditional waiver from pre-deposit of the dues adjudged against the appellant and stayed the recovery during the appeal's pendency. The decision was based on the appellant's strong prima facie case under the Export of Service Rules and the financial challenges faced by the appellant.

This detailed analysis of the judgment covers the issues involved comprehensively, highlighting the legal arguments, precedents, and the Tribunal's decision regarding the service tax demand and the grant of stay petition.

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