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2018 (1) TMI 15 - AT - Service TaxBusiness Auxiliary Service - whether the income earned out on account of service claimed as export under the category of Business Auxiliary Service is chargeable to service tax during the period 01.04.2009 to 31.03.2011? - marketing activities like maximizing the markets for Microsoft products including all local advertising, dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry, investigating feasibility for new markets for Microsoft products etc. - Held that - an identical issue has been examined by this Tribunal in the appellants own case M/s. Microsoft Corporation (I) (P) Ltd. Versus CST. New Delhi 2014 (10) TMI 200 - CESTAT NEW DELHI (LB) , where it was held that the services are being provided by the appellant to Singapore Recipient company and to be used by them at Singapore, may be for the purpose of the sale of their product in India, have to be held as export of services - such services provided to M/s Microsoft Operations P. Ltd. Singapore, amount to export of services and hence are not liable to service tax, we hold that the services being provided by appellants satisfy the conditions of Export of Service Rules, 2005, hence are not liable to service tax. Valuation - includibility - reimbursement received on account of services claimed as exported - Business Auxiliary Services - Held that - the Business Auxiliary Services in relation to MSS is covered as export of service under Export of Service Rules, 2005, the reimbursement in relation to MSS would also therefore, be not liable to service tax. Levy of service tax - maintenance and repair of software - Board Circular No.256/1/2006-CX-04 dated 07.03.2006 - Held that - The appellants have argued that product support services have been held to be non taxable in their own case by the Division Bench of this Tribunal because there was no difference of opinion on this issue between the two members and accordingly the issue is covered by the Final Order no.53737/2014 dated 23.09.2014 - demand set aside. Reverse charge mechanism - expenditure on foreign currency - Held that - the fact remains that the Ld. Commissioner has given no findings at all on the above demand in the impugned order and it would be in the interest of justice that the supporting evidence for the impugned period are submitted before the adjudicating authority, who will carefully examine the evidence in respect of this particular demand and given his findings and conclusion on the evidence and the submissions of the appellant made before him. The matter pertaining to service tax on foreign expenditure for 17.04.2006 to 31.03.2009 is remanded back to the Ld. Adjudicating authority to pass a fresh adjudication order after giving fair opportunity to appellants to defend their case - appeal allowed by way of remand.
Issues Involved:
1. Marketing Support Services (MSS) - Export status 2. Reimbursement in relation to MSS 3. Reimbursement in relation to Product Support Services (PSS) 4. Service tax on foreign currency expenditure Detailed Analysis: 1. Marketing Support Services (MSS) - Export Status The primary issue was whether the Marketing Support Services (MSS) provided by the appellant to Microsoft Singapore qualify as export of service under the Export of Service Rules, 2005, and thus, whether the consideration received, including reimbursements, is not taxable. The Tribunal referred to the Larger Bench decision in the appellant's own case (Microsoft Corporation India Pvt. Ltd. Vs. CST - 2014 (36) STR 766), which held that the customer for MSS is Microsoft Singapore, and the benefit of the service accrues outside India to Microsoft Singapore. Therefore, the MSS rendered to Microsoft Singapore would amount to export of services and are not liable to service tax. The Tribunal followed this precedent and held that the services being provided by appellants satisfy the conditions of Export of Service Rules, 2005, hence are not liable to service tax. 2. Reimbursement in Relation to MSS The second issue was whether the reimbursement received for MSS should be included in the taxable value. The demand confirmed on this account was for the period 2006-2007 to 2008-2009, amounting to ?36,64,48,321, as the value of such reimbursements was not included in the value of MSS. However, for the period 2009-2010 to 2010-2011, the demand was dropped as the value of MSS was inclusive of such reimbursements. Since the Tribunal held that the Business Auxiliary Services in relation to MSS qualify as export of services, the reimbursement in relation to MSS would also not be liable to service tax. 3. Reimbursement in Relation to Product Support Services (PSS) The third issue was whether the reimbursement received for Product Support Services (PSS) rendered by the appellant is taxable for the period from 09.07.2004 to 31.03.2005. The Tribunal noted that the product support services have been held to be non-taxable in the appellant's own case by the Division Bench of the Tribunal (Final Order No.53737/2014 dated 23.09.2014). Accordingly, the demand on this issue was set aside. 4. Service Tax on Foreign Currency Expenditure The fourth issue was whether certain foreign currency expenditures incurred by the appellant from April 2006 till March 2009 are taxable under the Act. The Tribunal observed that the Commissioner had confirmed the demand of ?65,52,957 for the period 17.04.2006 to 31.02.2009, while the demand for the period before this was dropped based on the Bombay High Court judgment in Indian National Shipowners Association Vs. UOI (2009 (13) STR 235 (Bom.)), and the demand for the subsequent period was also dropped as the appellant provided the required particulars. The Tribunal remanded the matter back to the adjudicating authority to pass a fresh adjudication order after giving the appellant a fair opportunity to defend their case, emphasizing the need for the Department to specify the relevant taxable category under Section 65(105) of the Act for demanding the service tax. Conclusion: The Tribunal set aside the demands in respect of MSS export status, reimbursement in relation to MSS, and reimbursement in relation to PSS. The matter concerning service tax on foreign currency expenditure was remanded back to the adjudicating authority for fresh consideration. The appeals were disposed of accordingly.
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