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2017 (12) TMI 91 - AT - Service TaxBusiness Auxiliary Services - entered into an agreement with M/s. Decathlon SA, France for various services - export of services or not? - Held that - the services rendered by the appellants clearly fall under the category of Export of Services. It is also clear from the clarificatory Circular issued by the Board vide 111/05/2009-ST, dated 24.02.2009 - In the present case, the service being category 3 Services of Rule 3(1)(iii), the Board clarified that it is possible that Export of Services may take place even when all the relevant activities take place in India, so long as the benefits of these services are provided outside India - The appellants clearly promoted the business of foreign entity for which they received commission. They had no arrangement with the Indian sellers of goods and neither they received any consideration from them. These type of activities should be considered as Export of Services not liable to service tax - reliance placed in the case of M/s. Microsoft Corporation (I) (P) Ltd. Versus CST. New Delhi 2014 (10) TMI 200 - CESTAT NEW DELHI (LB) . Appeal allowed - decided in favor of appellant.
Issues:
1. Tax liability under Business Auxiliary Service for services provided to a foreign client. 2. Determination of tax liability based on the location of the service recipient. 3. Applicability of Export of Services rules and circulars. 4. Consideration received in convertible foreign exchange. 5. Precedents supporting the classification of services as Export of Services. Analysis: 1. The appellants contested the tax liability imposed under Business Auxiliary Service for their services provided to a foreign client. The Revenue held that these services were taxable under section 65(19) read with section 65(105)(zzb) of the Finance Act, 1994. The appellants argued that they provided services to a foreign client and should be considered as Export of Services. The original authority confirmed a significant service tax liability on the appellants along with penalties under relevant sections of the Finance Act, 1994. 2. The counsel for the appellant contended that the services rendered fell under Business Auxiliary Service but should be considered under the Export of Services Rules, 2005. He emphasized that the tax liability should be determined based on the location of the service recipient, which, in this case, was a foreign-based client. The appellants received consideration in convertible foreign exchange, supporting their claim for Export of Services. Various decided cases were cited to bolster the argument for the Export of Services classification. 3. The Authorized Representative reiterated the findings of the lower authorities regarding the tax liability of the appellants under Business Auxiliary Service. 4. Upon careful consideration of the services provided by the appellants and the receipt of consideration in convertible foreign exchange, the Tribunal concluded that the services indeed qualified as Export of Services. Referring to a clarificatory Circular issued by the Board, the Tribunal highlighted that Export of Services could occur even if the activities took place in India, as long as the benefits were provided outside India. The appellants promoted the business of a foreign entity, receiving commission without any arrangement or consideration from Indian sellers. 5. The Tribunal referenced previous decisions, including Microsoft Corporation (I) (P) Ltd. Vs Commissioner of Service Tax, New Delhi, Gap International Sourcing (India) Pvt. Ltd. Vs Commissioner of Service Tax, Delhi, and Paul Merchants Ltd. Vs Commissioner of Central Excise, Chandigarh, among others. These cases supported the classification of similar activities as Export of Services not subject to service tax. The Tribunal found the impugned order lacking merit and set it aside, allowing the appeal with consequential relief, if any.
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