2017 (12) TMI 237 - AT - Service Tax

Business Auxiliary services - business promotional activities - POPOS Rules - various obligations on the part of the appellant which included the promotion of the brand and business of VISA and Master Card - export of services or not? - Held that - the fact that the service recipients, with whom the appellants entered into agreements are located outside India is not in dispute as can be seen from the proposals of the show case notice itself - Even the Commissioner in his order while admitting this aspect of agreement, however, held that these services were actually consumed and utilized in India. We are not in agreement with such conclusion - Admittedly, the other parties to the agreement with the appellants have received the services. The Service Tax being destination based consumption tax, the present case will cover the requirements for export of services. The decision in the case of Verizon Communication India Pvt. Ltd. Versus Assistant Commissioner, Service Tax, Delhi III, Division-XIV & Anr. 2017 (9) TMI 632 - DELHI HIGH COURT referred, where it was held that When the Master Supply Agreement between Verizon India and Verizon US is examined, it is plain that the recipient of the service is Verizon US and it is Verizon US that is obliged to pay for the services provided by Verizon India. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the promotional activities undertaken by the appellants for VISA and Master Card are liable to Service Tax under business auxiliary service.
2. Whether the services provided by the appellants can be considered as export of service under the Export of Service Rules, 2005.
3. Determination of the place of provision of service based on the location of the recipient.
4. Examination of the High Court decision in Verizon Communication India Pvt. Ltd. and its applicability to the present case.

Analysis:
1. The appeal challenged the order of the Commissioner (Adjudication) Service Tax, New Delhi, holding the appellants liable to pay service tax and imposing penalties for promotional activities related to VISA and Master Card.
2. The appellant argued that the services provided were for the benefit of entities located outside India, making them eligible for export of service under the Export of Service Rules, 2005. Considerations were received in convertible foreign exchange, supporting their claim.
3. The Revenue contended that the services were consumed in India, as evidenced by references to local addresses and dispute resolution within India in the agreements. They argued against the export of service claim.
4. The Tribunal noted that the services provided by the appellants fell under business auxiliary service and were categorized under BAS. The place of provision of service was determined by the location of the recipient, who, in this case, was located outside India.
5. Referring to the High Court decision in Verizon Communication India Pvt. Ltd., the Tribunal emphasized that the recipient of the service, located abroad, must be considered for determining the destination of service. The High Court's ruling highlighted the importance of the place of consumption in deciding the destination of services.
6. Based on the analysis and the High Court's decision, the Tribunal concluded that the impugned order was not sustainable. Therefore, the order was set aside, and the appeal was allowed. The judgment followed the legal principles outlined in the High Court decision regarding the export of service and the determination of the recipient's location for service tax purposes.