2016 (12) TMI 1133 - AT - Service Tax

Receipt of commission from foreign principle in foreign currency convertible in India - Business Auxiliary Services - whether export of services? - Held that - the issue stand decided by the Larger Bench decision of the Tribunal in the case of Microsoft Corporation (I) (P) Ltd. Vs. CST New Delhi 2014 (10) TMI 200 - CESTAT NEW DELHI (LB) , where it was held that in as much as marketing operation in India were not at behest of any Indian customer and the same were being provided to foreign recipients, the same has to be treated as export of services and not liable to tax - the procurement of orders in Indian market on behalf of the foreign principle would not be taxable as no service is considered to have been provided in India - appeal allowed in favor of appellant.

Summary

Issues:
Whether the appellant's marketing services to foreign principals for selling products in India constitute export of services and are exempt from service tax liability.

Analysis:
The case involved the appellant providing marketing services to their foreign principals for selling products in India, receiving commission in foreign currency. The authorities raised demands for service tax, interest, and penalty, treating the activity as business auxiliary services provided in India. The appellant argued that the services amounted to export of services and should not attract service tax liability.

Both parties agreed that the issue was decided by the Larger Bench decision in the case of Microsoft Corporation (I) (P) Ltd. Vs. CST New Delhi, where it was held that marketing operations in India for foreign recipients constitute export of services and are not taxable. This decision was supported by another Larger Bench ruling in the case of Paul Merchants Ltd. Vs. CCE Chandigarh, along with subsequent Tribunal decisions in similar cases. The consistent ratio across these judgments was that procuring orders in the Indian market for foreign principals does not amount to providing services in India and is therefore not taxable.

Considering the precedents and the nature of the appellant's activities, the Tribunal found no justifiable reasons to uphold the original order demanding service tax. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.