2017 (5) TMI 1087 - AT - Service Tax

Business Auxiliary Service - Export of services - the appellant did not pay service tax on the ground that the service provided are categorized u/r 3(1)(iii) of Export of Service Rule, 2005 - Held that - the respondent had under taken various activities pursuant to the contract entered into with the holding company, who is located abroad and that the benefit of the services provided by the respondent have been availed and consumed by such company located outside India - thus, such services should fall u/r 3(1)(iii) of the Export Service Rule, 2005 - demand set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
Classification of services under Business Auxiliary Service and Export of Service Rules, 2005.

Analysis:
The appeal was filed by the Revenue against an order passed by the Commissioner of Service Tax, Delhi. The respondent was providing marketing and Help Desk services to its holding company located in Israel. The appellant contended that the services fell under Rule 3(1)(iii) of the Export of Service Rules, 2005, and thus, no service tax was paid during the disputed period. The department disagreed and initiated show cause proceedings for recovery of service tax. The impugned order dropped the proposals made by the department, categorizing the services as "Business Auxiliary Service" covered by the Export of Service Rules, 2005. The Revenue challenged this decision, arguing that the services were essentially provided and performed in India, not outside India where the holding company was located.

The Advocate for the respondent argued that the services provided to the foreign holding company should be classified as Business Auxiliary Service and considered export under Rule 3(1)(iii) of the Export of Service Rules, 2005. It was emphasized that even if certain activities were undertaken in India, the services could still be considered as exported since the beneficiary was the holding company located outside India. The Advocate relied on previous tribunal decisions to support this position.

After hearing both parties and examining the records, the Tribunal found that the respondent had undertaken activities as per the contract with the holding company located abroad, and the services provided were availed and consumed by the foreign company. Therefore, the services were deemed to fall under Rule 3(1)(iii) of the Export of Service Rules, 2005. Citing the decisions referred to by the Advocate, the Tribunal concluded that the services should be considered as exported. As a result, the impugned order was upheld, and the appeal filed by the Revenue was dismissed.

In the final pronouncement on 31/03/2017, the Tribunal confirmed the dismissal of the appeal, indicating that the services provided by the respondent to the foreign holding company were rightly classified as export of services under the relevant rules and regulations.