2017 (4) TMI 901 - AT - Service Tax

Business Auxiliary Service - agreement with holding company for providing promotional activities - Held that - The issue involved in this case is no more res-Integra in view of the decision in the case of 2016 (7) TMI 1209 - CESTAT NEW DELHI while examining the scope of Export of Service Rules 2005 with reference to BAS where it was held that destination has to be decided on the basis of place of consumption not the place of performance of service in case of Business Auxiliary Service - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Determination of service tax liability under Business Auxiliary Service or Export of Service Rules, 2005.

Analysis:
1. The appellant provided marketing and liaison services to its Singapore-based holding company. The Service Tax Department contended that these services fell under "Business Auxiliary Service" and issued a show cause notice. The Commissioner upheld the tax demand, stating the services did not meet the Export of Service Rules, 2005 requirements.

2. The appellant argued that the services were used outside India for the benefit of the Singapore recipient, falling under Rule 3(3) of the Export of Service Rules, 2005. They cited a precedent involving Microsoft Corporation to support their claim.

3. The respondent maintained that the services did not meet the Export of Service Rules conditions as they were provided and consumed within India.

4. The Tribunal deliberated on whether the services provided by the appellant qualified as exports under Rule 3 of the Export of Service Rules, 2005 or if they were liable for service tax under Business Auxiliary Services.

5. The key issue was whether the services provided by the appellant could be considered exports under the relevant rules.

6. The disputed period was from 15.03.2005 to 18.04.2006. The services were categorized as Business Auxiliary Service, and the appellant did not pay service tax, claiming they were exported and thus exempt.

7. The Tribunal found that the services met the conditions under Rule 3 of the Export of Service Rules, 2005, as they were provided to a recipient in Singapore for their business activities. The Tribunal disagreed with the adjudicating authority's interpretation that the recipient's presence in India affected the tax liability.

8. Citing precedents like M/s. Paul Merchants Ltd. v. CCE, Chandigarh and Microsoft Corporation (I) Pvt. Ltd. v. CST, New Delhi, the Tribunal concluded that the services provided by the appellant were indeed exports, absolving them of service tax liability under Business Auxiliary Service.

9. The Tribunal found no merit in the impugned order, setting it aside and ruling in favor of the appellant. The appeal was allowed, and the decision was pronounced on 13.04.2017.