2018 (3) TMI 22 - AT - Service Tax

Business Auxiliary Services - Revenue by entertaining a belief that since such services were being provided in India by the appellant, they are liable to service tax under the category of business auxiliary services - Held that - In the case of Microsoft corporation (India) (P.) Ltd. 2014 (10) TMI 200 - CESTAT NEW DELHI (LB) , the majority decision of the Tribunal held that promotion of a foreign company in India has to be held as export of services inasmuch as services were being provided by the assessee to his principal located abroad. Marketing operations done by an assessee in India cannot be said to be at behest of any Indian customers - the services were held to be as having been delivered and/or used outside India and thus being export of services. Appeal allowed - decided in favor of appellant.

Issues:
1. Whether the services provided by the appellant can be considered as export of services under the Export of Services Rules, 2005.
2. Whether the services provided by the appellant are liable to service tax in India under the category of business auxiliary services.
3. Whether the demand raised by the Revenue invoking a longer period of limitation is justified.
4. Whether the services provided by the appellant, even though in India, can be considered as export of services based on the location of the service recipient.

Analysis:
1. The appellant, a company registered in Noida, entered into a contract with M/s.NCS (NCS Pearson, USA) for providing electronic tests delivery services to testing centers in India. The Revenue contended that the services were provided and consumed in India, not meeting the condition of being provided from India and used outside India as per Export of Services Rules, 2005. Thus, the services were considered liable to service tax under section 66 of the Finance Act, 1994.

2. The Revenue raised demands of duties on the appellant under the category of business auxiliary services, claiming that the services were provided in India. The adjudicating authority upheld the demand, stating that since the services were provided in India and the fees were collected in Indian rupees, the services were liable to service tax. However, the appellant argued that the services fell under the Export Rules as the service recipient was located outside India.

3. The appellant contested the demand on the grounds that the services were export of services as per rule 3(1)(iii) of the Export Rules, and relied on Tribunal decisions and circulars to support their stance. The demand was also challenged on the point of limitation. The Tribunal noted that the issue had been previously addressed in decisions such as Microsoft Corporation (India) (P.) Ltd. and Paul Merchants Ltd., where services provided by Indian companies to foreign entities were considered as export of services.

4. Citing precedents like the Microsoft Corporation case and others, the Tribunal ruled that services provided by the appellant, even though in India, could be considered as export of services based on the location of the service recipient outside India. The majority decisions of the Tribunal supported the view that services rendered by Indian companies to foreign principals could qualify as export of services, even if the services were provided within India. Therefore, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

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