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2016 (6) TMI 831 - AT - Service TaxExport of services or not - providing services to foreign companies for promoting their product in India - Revenue entertained a view that since said service were being obtained in India and were being utilized in India, the same cannot be held to be export of services so as to extend the benefit of Export of Service Rules, 2005 - Held that - Even the Hon ble Madras High Court in the case of Suprasesh General Insurance Services & Brokers P. Ltd. vs. CST, Chennai 2015 (9) TMI 1219 - MADRAS HIGH COURT has considered an identical situation and held that such set of arrangement would amount to receiving the consideration in Indian rupee would amount to receiving the consideration in convertible foreign exchange only. - Demand set aside - Decided in favor of assessee.
Issues:
Confirmation of service tax liability under Business Auxiliary Service, applicability of Export of Service Rules, consideration of commission received in Indian rupee for determining export of services. Analysis: 1. Confirmation of Service Tax Liability: The judgment addresses the confirmation of service tax liability amounting to approximately ?1.80 crores against the assessee under the category of Business Auxiliary Service. The Revenue contended that the services provided by the appellant to foreign companies for promoting their products in India did not qualify as export of services, leading to the demand for service tax for the period October 2004 to September 2011. 2. Applicability of Export of Service Rules: The main issue revolved around whether the services provided by the appellant could be considered as export of services under the Export of Service Rules, 2005. The appellant argued that since they were receiving commission from foreign companies in convertible foreign exchange, the services should be treated as export of services. However, the Revenue disagreed, stating that as the services were obtained and utilized in India, they did not qualify for the export status. 3. Consideration of Commission in Indian Rupee: A crucial aspect of the case was the consideration of the commission received by the appellant in Indian rupee for determining the export of services. While the appellant received a major portion of the commission in foreign exchange, around 5% was directly paid by Indian buyers in Indian rupee with the consent of the foreign company. The question arose whether this partial payment in Indian rupee satisfied the condition of consideration to be received in foreign exchange as per the Export of Service Rules. 4. Precedent Decisions and Legal Interpretations: The judgment extensively referred to various precedent decisions to support its analysis. It cited cases such as Microsoft Corporation (I) (P) Ltd. vs. Commissioner of Service, Gap International Sourcing (India) Pvt. Ltd. vs. Commissioner of Service Tax, and Paul Merchants Ltd. vs. CCE, Chandigarh, among others. These decisions established that commission paid in foreign exchange, even if indirectly routed through Indian buyers, could still qualify as consideration received in foreign exchange for export of services. 5. Judicial Interpretation and Conclusion: The Tribunal analyzed the issue in light of previous decisions and legal interpretations. It referenced the case of National Engineering Industries Ltd. vs. CCE, Jaipur, where the Tribunal held that commission received from foreign suppliers for procuring orders from Indian buyers constituted export of services. The judgment also cited the decision of the Hon'ble Madras High Court in a similar case, affirming that arrangements involving commission paid in Indian rupee could still be considered as receiving consideration in convertible foreign exchange. Based on these interpretations and precedents, the Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief.
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