2023 (8) TMI 1366 - AT - Service Tax

Levy of Service Tax - commission agent of foreign parties to enable them to sell their goods to Indian customers/clients - HELD THAT - This issue was examined at length by a Larger Bench of the Tribunal in M/S. ARCELOR MITTAL STAINLESS (I) P. LTD (NOW KNOWN AS M/S. ARCELOR MITTAL DISTRIBUTION SOLUTIONS INDIA PRIVATE LIMITED) VERSUS COMMISSIONER SERVICE TAX MUMBAI-II 2023 (8) TMI 107 - CESTAT MUMBAI . After examination of the relevant provisions of the Export of Service Rules, 2005, and the Circular dated February 02, 2009 issued by the Central Board of Excise and Customs, the Larger Bench held It was the consistent view of the High Courts and the Tribunal that export of service would take place under rule 3(1)(iii) of the 2005 Export Rules if a person residing in India provides a service to a foreign entity to enable it to book orders for customers in India. This is for the reason that the foreign entity is located outside India and the payment is received by the person residing in India in convertible foreign exchange. The Larger Bench of the Tribunal held that where the Indian entity helps the foreign entity to sell its goods to the Indian customer and for this service receives remuneration in convertible foreign exchange, the Indian entity would be providing BAS to the foreign entity which would be the service recipient. This service would fall in the category of export of service as contemplated under rule 3 of the 2005 Export Rules and would, therefore, be exempted from payment of service tax. Impugned Order set aside - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are related to the classification of services provided by the appellant as "export of service" for exemption from service tax, based on the location of service delivery and consumption.

Issue 1: Allegation of services being delivered and consumed in India:
The appellant, a commission agent of foreign parties, was alleged to have provided "Business Auxiliary Services" (BAS) to Indian customers, leading to a show cause notice for non-payment of service tax. The notice contended that since the end user of the service was in India, the service should not be considered as an "export of service."

Issue 2: Lack of documentary evidence for service export:
The Assistant Commissioner and Commissioner (Appeals) denied the appellant's claim of service export exemption due to the failure to produce documentary evidence substantiating the export of services to a foreign client, despite receiving foreign remittances.

Judgment:
The Tribunal considered the show cause notice's allegations regarding the nature of services provided by the appellant and the receipt of commissions in foreign currency. It was noted that the denial of the exemption notification was based on the location of the end user of the service being in India.

Reference to Larger Bench decision:
The appellant's representative referenced a decision by a Larger Bench of the Tribunal in a similar case, emphasizing the relationship between the service provider and recipient in determining the export of service status. The Tribunal highlighted the importance of the location of the service recipient for service tax liability.

Decision based on Larger Bench ruling:
In light of the Larger Bench's decision, which clarified that services facilitating the sale of goods to Indian customers by a foreign entity, with remuneration in foreign exchange, qualify as "export of service," the Tribunal set aside the Commissioner (Appeals) order and allowed the appeal.

This summary provides a detailed breakdown of the issues involved in the judgment, the arguments presented by both parties, and the Tribunal's decision based on legal interpretations and precedents.