2018 (1) TMI 1398 - AT - Service Tax

Business Auxiliary Services - Respondent entered into an agreement with M/s Discount City Hotels Ltd. UK (DCH) for facilitating the working of its back office in India with respect to running and maintaining online hotel booking - Held that -The issue is squarely covered by the decision in the case of M/S PAUL MERCHANTS LIMITED & OTHERS VERSUS CCE, CHANDIGARH 2012 (12) TMI 424 - CESTAT, DELHI (LB) , where it was held that The services provided by the agents and sub-agents throughout during the period of dispute are classifiable as business auxiliary service under section 65(105)(zzb) read with section 65(19) of the Finance Act, 1994 and the same have been exported in terms of the provisions of rule 3(1)(iii) read with rule 3(2) of the Export of Services Rules, 2005 and hence no service tax is leviable - appeal dismissed - decided against Revenue.

Summary

Issues:
Department appealing against Order-in-Original classifying services as export of services under Business Auxiliary Services (BAS).

Analysis:
The appeal was filed by the Department against an Order-in-Original classifying services provided by the respondent as export of services under Business Auxiliary Services (BAS). The respondent had agreements with companies from the UK and the USA for back office operations and various activities. The department contended that these services fell under BAS. However, the adjudicating authority considered them as export of services, leading to the department's appeal.

During the hearing, the parties presented their arguments. The Tribunal referred to previous judgments, including Paul Merchants Ltd. and Microsoft Corporation I P Ltd., where it was established that the recipient of the service is crucial in determining the destination of the service. If the recipient is located abroad and payment is received in convertible foreign currency, it qualifies as export of service. Reimbursements for services provided to foreign entities are also considered non-taxable.

The Tribunal emphasized that the destination of services should be based on the place of consumption, not the place of performance. As the services provided were classified as business auxiliary services and exported under relevant rules, no service tax was applicable. The Tribunal also ruled that the question of time-bar and exemption eligibility were irrelevant once the main question of export of services was resolved.

In conclusion, the Tribunal upheld the impugned order, finding it reasonable based on the precedents and legal principles discussed. Consequently, the appeal filed by the Department was dismissed, affirming the decision that the services in question qualified as export of services under BAS regulations.