2017 (11) TMI 543 - AT - Service Tax

Business Auxiliary Service - Commercial Training or Coaching Centre Service - demand on the ground that Business Auxiliary service was received by Bentley, Australia for its business in India and also used/ utilised in India - Held that - with regard to categorization of service for the purpose of consideration as export, under Export of Service Rules 2005, the CBEC vide Circular dated 24.02.2009 has clarified that for category III services, falling under Rule 3(1)(iii) ibid, even if the relevant activities taken place in India, the said service should be considered as export, so long as the benefit of those services accrued outside India - In the present case, since the appellant had provided the services to M/s.Bentley, Australia, such service should be construed as export, in view of the clarification furnished by the CBEC - demand set aside. Commercial Training or Coaching Service - demand on the ground that the same was provided by the appellant for imparting skill and knowledge and also the services do not fall under the exclusion part of such definition - Held that - It is an admitted fact on record that the appellant is an Information Technology Company, engaged in providing IT Services. The software provided by the appellant cannot be used by the customers /clients, unless their employees are properly trained to use such software. Thus, in such an eventuality, providing of assistance/training to the customer/client of the software would be construed as incidental and ancillary to the sale of software. Thus, providing such training will not fall under the purview of Commercial Training or Coaching Centre Service - demand set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax demand on Business Auxiliary Service and Commercial Training or Coaching Centre Service.

Analysis:

1. Business Auxiliary Service:
The appellant was accused of not paying service tax for services provided to Bentley, Australia, and used in India. The appellant argued that as per a Circular issued by CBEC, the service provided to overseas clients should be considered as export under Rule 3(1)(iii) of the Export of Services Rules, 2005. The Tribunal referred to previous decisions and clarified that service tax is a destination-based consumption tax, and the foreign entities receiving the service are the consumers, not the Indian entities involved in the transactions. The Tribunal held that the service provided by the appellant to promote the market for foreign entities in India amounts to export of service, and thus, no service tax liability exists.

2. Commercial Training or Coaching Centre Service:
Regarding the demand for service tax on Commercial Training or Coaching Centre Service, the appellant contended that the training provided was incidental to the sale of software and therefore should not be taxed under this category. The Tribunal agreed with the appellant, emphasizing that the primary objective of the appellant is providing IT services, and the training provided was essential for the clients to use the software effectively. Citing a previous case, the Tribunal ruled that training provided to buyers of goods should not be taxed under Commercial Coaching service. Consequently, the Tribunal found no merit in confirming the service tax demand under this category and ruled in favor of the appellant, allowing the appeals.

In conclusion, the Tribunal set aside the service tax demands on Business Auxiliary Service and Commercial Training or Coaching Centre Service, based on the arguments presented by the appellant and the legal interpretations provided by the Tribunal in relevant cases. The judgment was pronounced in favor of the appellant on 22.09.2017 by the Appellate Tribunal CESTAT NEW DELHI.