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2017 (3) TMI 941 - AT - Service TaxService to foreign party - scope of the term export - Online information and Data Base access or retrieval service, management consultant service in the field of health care management - whether the service will be treated as export or not? - Held that - identical issue has come up before this Tribunal in the case of Paul Merchants Ltd. vs. CCE, Chandigarh 2012 (12) TMI 424 - CESTAT, DELHI (LB) wherein it was held that When the person on whose instructions the services in question had been provided by the agents/sub-agents in India, who is liable to make payment for these services and who used the service for his business, is located abroad, the destination of the services in question has to be treated abroad. The destination has to be decided on the basis of the place of consumption, not the place of performance of Service - demand set aside - appeal dismissed - decided against Revenue.
Issues:
Interpretation of service tax applicability on services provided to a foreign party in a different country. Analysis: The appeal was filed by the department against a previous order where the Commissioner ruled that services provided by the respondent to a foreign party in the field of health care management were not subject to service tax. The department contended that the services were taxable. The Tribunal referred to a previous case involving Paul Merchants Ltd. vs. CCE, Chandigarh, where it was discussed that the definition of "export" in the context of services differs from that of goods. It was emphasized that the Export of Services Rules, 2005 align with the principle that service tax is a destination-based consumption tax. The Tribunal also cited the case of Microsoft Corporation (I) (P) Ltd. Vs. CST, New Delhi, where similar views were expressed. Based on these precedents, the Tribunal found no reason to interfere with the impugned order and upheld the ruling that the services provided were not subject to service tax. The Tribunal highlighted that the determination of what constitutes the export of service should strictly adhere to the provisions of the Export of Services Rules, 2005. It was emphasized that leaving this determination to individual taxpayers or collectors would lead to confusion. The Tribunal specifically addressed the issue of money transfer services provided by Western Union, stating that the recipient and consumer of the service are the company abroad, not the individuals receiving money in India. Therefore, such services were classified as export of service. Additionally, reimbursement for advertisement and sales promotion activities received from Western Union was deemed non-taxable as they were considered export of service. The Tribunal concluded that the services provided by the agents and sub-agents fell under the category of "Business Auxiliary Service" and were exported according to the Export of Services Rules, 2005, making them not liable for service tax. The Tribunal further clarified that the time-bar issue was irrelevant once the main question regarding the taxability of services was resolved in favor of the agents and sub-agents. The eligibility for exemption under Notification No.6/2005-S.T. was deemed irrelevant in light of the services being classified as export of service. The services provided by the agents and sub-agents were classified as "Business Auxiliary Service" and exported as per the Export of Services Rules, 2005, leading to the decision that no service tax was applicable. The Tribunal concluded that there was no need to remand the cases of sub-agents and that decisions should be based on the majority opinion. Ultimately, the appeal filed by the department was dismissed, and the cross objection was disposed of accordingly.
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