2022 (11) TMI 1491 - AT - Service Tax

Levy of service tax - Business Auxiliary Service - commission received by the appellant for providing services in India to foreign companies - Export of Service or not - HELD THAT - The fact is not under dispute that the appellant have provided sales promotion and marketing service in India for sale of the goods supplied by the foreign based companies and the service recipient is those foreign based companies and the payment is received in convertible foreign currency. The contention of the revenue is that since the service was provided in India therefore, the same will not be treated as Export of Service hence, the service is taxable. It is found that despite the fact that the service was provided in India but the service recipient is admittedly located outside India. The service of the appellant falls under sub-clause (zzb). As per Rule 3 of Export of Service Rules, 2005 in respect of service falling under sub-clause (zzb), the same falls under clause (iii) of Rule 3(1) according to which the only condition to qualify the service as export of service, it provides that the service is required only in relation to business or commerce be provision of such service to recipient located outside India and when provided otherwise be provision of such service to a recipient located outside India at the time of provision of such service. This issue has already been considered by this tribunal in various judgments including the case of YAMAZAKI MAZAK INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2017 (8) TMI 1050 - CESTAT MUMBAI wherein on the identical service, this tribunal has considered the issue in detail and held that Commission Agent Service provided to foreign based entity for promoting/marketing their goods in India on consideration the activity of the Indian agent providing promotion/marketing, technical support, installation, commission, etc. for sale of goods of foreign based entities in India on commission basis amounts to export of service and no service tax is demandable on such activities particularly when such commission received in convertible foreign exchange. The appellant s service is clearly qualified as export of service hence, the same is not taxable. The impugned order is set aside. Appeal is allowed.

Summary

Issues Involved:
The issue involves the demand of service tax on commission received by the appellant for providing services in India to foreign companies, categorized as 'Business Auxiliary Service' u/s 65(19) of Finance Act, 1994, and whether such services qualify as 'Export of Service' u/s 65(105)(zzb) of Finance Act, 1994.

Issue 1 - Demand of Service Tax:
The appellant received a show cause notice contending that the commission earned for coordinating customers in India with overseas suppliers constitutes 'Business Auxiliary Service' taxable u/s 65(19) of Finance Act, 1994. The department argued that even if services were rendered to foreign nationals and paid for in convertible foreign currency, they were provided in India and hence not treated as export. The Order-In-Original confirmed the demand of service tax, penalties, and interest. The Commissioner (Appeals) upheld the order, leading to the present appeal.

Issue 2 - Export of Service:
The appellant argued that despite services being provided in India, since the service recipient was located outside India and payment was received in convertible foreign currency, it qualifies as 'Export of Service' u/s 65(105)(zzb) of Finance Act, 1994. Citing various judgments, the appellant contended that the service falls under Rule 3 of Export of Service Rules, 2005, and meets the conditions for export of service. The Revenue reiterated the findings of the impugned order.

Judgment Summary:
The Tribunal considered that the appellant provided sales promotion and marketing services in India for foreign-based companies, with the service recipient being outside India and payment received in convertible foreign currency. Despite services being rendered in India, the service recipient being outside India qualified the service as 'Export of Service' u/s 65(105)(zzb) of Finance Act, 1994. Referring to Rule 3 of Export of Service Rules, 2005, the Tribunal held that the appellant's service met the conditions for export of service, as established in various judgments including YAMAZAKI MAZAK INDIA PVT. LTD. The Tribunal concluded that the appellant's service clearly qualified as export of service and was not taxable, setting aside the impugned order and allowing the appeal.

Separate Judgment:
No separate judgment was delivered by the judges in this case.