2017 (3) TMI 1683 - AT - Service Tax

Business auxiliary services - services of promotion of sales of products in India of the principals located outside India (China & Spain) - Export of services or not? - Held that - The consideration was received in foreign currency for the export of services - The identical issue has come up before the Tribunal in the case of National Engineering and Industries Ltd. Vs. CCE, Jaipur 2016 (1) TMI 1013 - CESTAT NEW DELHI , where it was held that In case of the commission received from foreign supplier for procuring orders from the Indian buyers to whom the goods were directly supplied by the foreign supplier, the service rendered clearly satisfies the requirement of the same being the export of service. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of business auxiliary services under Section 65(105)(zzb) of the Finance Act, 1994 for promotion of sales services provided by the appellant to principals located outside India (China & Spain).

Analysis:
The appellant filed an appeal against the Order-in-Original dated 4.10.2013 regarding the service tax demanded for providing promotion of sales services to principals outside India. The Tribunal considered the contention that the consideration was received in foreign currency for exporting services. Referring to the case of National Engineering and Industries Ltd. Vs. CCE, Jaipur - 2016 (42) STR 537 (Tri.-Del.), the Tribunal observed that in situations where commission is paid by Indian buyers to the appellant on behalf of the foreign supplier, the payment can be deemed to have been made in foreign exchange. This interpretation aligns with the Supreme Court judgment in the case of J.B. Boda - 1997 (223) ITR 271 (SC). Therefore, the Tribunal found the issue in favor of the appellant and allowed the appeal, setting aside the impugned order.

The Tribunal heard arguments from both sides and concluded that the service rendered by the appellant for procuring orders from Indian buyers on behalf of foreign suppliers qualifies as export of service. The Tribunal relied on the precedent set by the case of Paul Merchants and the Supreme Court judgment in J.B. Boda to establish that payments made to the appellant can be deemed as in foreign exchange. This arrangement simplifies the process without significant foreign exchange implications for India. Consequently, the Tribunal found the impugned order unsustainable and allowed the appeal filed by the appellant.

In light of the principles established in previous judgments and the specific circumstances of the case, the Tribunal decided to follow the ratio laid down in the earlier case. By applying the same reasoning, the Tribunal found no valid justification to uphold the impugned order and proceeded to set it aside. Ultimately, the appeal filed by the appellant was allowed by the Tribunal, bringing the matter to a favorable conclusion for the appellant.