2017 (5) TMI 1022 - AT - Service Tax

Providing marketing services to their foreign principals - Business auxiliary services or export of services - commission received from foreign principal in convertible foreign currency - taxability - Held that - marketing operations in India were not at the 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 service tax - the procurement of orders in the Indian market, on behalf of the foreign principal for which payment is received in foreign exchange from the principal, would not be taxable as no service is considered to have been provided in India - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the activity of providing marketing services to foreign principals for selling products in India amounts to "business auxiliary services" attracting service tax liability.
2. Whether the services provided by the appellant to foreign principals can be considered as export of services and hence not liable to service tax.

Analysis:
1. The appellant was engaged in providing marketing services to their foreign principals for selling products in India, for which they received commission in foreign currency. The authorities raised demands for service tax, invoking a longer period of limitation. The original adjudicating authority confirmed the demand, interest, and penalty, rejecting the appellant's argument that the services amounted to export of services and were not liable to service tax.

2. The Tribunal referred to the decisions in the cases of Microsoft Corporation (I) (P) Ltd. Vs. CST New Delhi, Paul Merchants Ltd. Vs. CCE Chandigarh, Gap International sourcing (I) Pvt. Ltd. Vs. CCE, and A.T.E. Enterprises Pvt. Ltd. Vs. CST Mumbai. These decisions established that when marketing operations in India were not at the behest of Indian customers and were provided to foreign recipients, it constituted export of services and was not subject to service tax. The procurement of orders in the Indian market for foreign principals, with payment received in foreign exchange, was deemed non-taxable as no service was considered provided in India.

3. Considering the precedents and the nature of services provided by the appellant, the Tribunal found no justifiable reasons to uphold the impugned order. Consequently, the order was set aside, and the appeal was allowed with consequential relief to the appellant.