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2019 (6) TMI 1509 - AT - Service TaxExport of services or not - Business Auxiliary Service - services in India in respect of marketing, procurement of order, sales, realization and remitting the same proceed, on which they have received the commission - place of provision of services - period April, 2008 to October, 2008 - HELD THAT - The appellants have received commission from its parent entity, M/s Stollberg, GMBH, Germany for rendering their services in India in respect of marketing, procurement of order, sales, realization. The services in the instant case have been delivered outside India and used outside India and since payment for the service has been received in convertible foreign exchange, the same would have to be treated as exported out of India - the services provided by the appellant, qualify as the export of services and accordingly, the service tax is not payable on the commission earned on such services. The issue is decided in the case of M/S GAP INTERNATIONAL SOURCING (INDIA) PVT. LTD. VERSUS CST, DELHI 2014 (3) TMI 696 - CESTAT NEW DELHI where it was held that The performance of such service in India, would not make them received/consumed in India, if beneficiary user/recipient of said service provided in relation to business or commerce, who has paid for these service and has used the service in his business, is located abroad. Appeal allowed - decided in favor of appellant.
Issues:
1. Demand of service tax on commission received for services provided in India. 2. Interpretation of Export of Services Rules, 2005. 3. Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Issue 1: Demand of service tax on commission received for services provided in India The appellant, a company providing services to its parent company in Germany, received commission for marketing, procurement of orders, sales, and realization in India. Show-cause notices were issued, resulting in two adjudication orders confirming the service tax demand with penalties. The appellant contended that the services qualified as export of services under the Export of Services Rules, 2005, and hence, no service tax was payable. The Appellate Authority upheld the demand and penalties, except for the penalty under Section 76. The Tribunal, after considering various decisions, found that the services were delivered and used outside India, thus qualifying as export of services. Consequently, the service tax on the commission earned was deemed not payable, and the appeal was allowed. Issue 2: Interpretation of Export of Services Rules, 2005 The appellant argued that the services provided to the parent company in Germany fell under the category of "Business Auxiliary Service" as per the Export of Services Rules, 2005, and hence, no service tax was applicable. Referring to Rule 3(1)(iii) and Rule 3(2)(b) of the Rules, the appellant believed that services provided in relation to business or commerce to a recipient outside India, with payment received in convertible foreign exchange, constituted export of service. The appellant relied on CBEC Circular No.111/05/2009-ST and various Tribunal decisions to support this interpretation. The Tribunal, aligning with the cited precedents, concluded that the services qualified as export of services, exempting them from service tax liability. Issue 3: Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 The penalties imposed under Sections 77 and 78 of the Finance Act, 1994, were challenged by the appellant. The Tribunal, while setting aside the penalty under Section 76, upheld the penalties under Sections 77 and 78. However, upon determining that the services provided constituted export of services and were not subject to service tax, the penalties were no longer applicable. The Tribunal allowed the appeal, thereby negating the penalties imposed under Sections 77 and 78, in addition to dismissing the demand for service tax on the commission earned for services provided in India. This detailed analysis of the judgment covers the issues of demand of service tax, interpretation of Export of Services Rules, 2005, and the applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, providing a comprehensive overview of the legal reasoning and conclusions reached by the Tribunal in this case.
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