2018 (4) TMI 914 - AT - Service Tax

Business Auxiliary services - Service of commercial advisor for the purpose of the sales promotion and marketing of goods produced by the said foreign firm in India - export of service or not? - Held that - in the present case the appellant is acting as commission agent of M/s. Aashmore Pvt Ltd, a foreign company who is the recipient of the service - the Board has also clarified by its Circular dated 24.02.2009 regarding the services used outside India. When the services provided in India and used outside India and payment of such services received by the service provider in convertible foreign exchange then it will be treated as Export of Services under Rules, 2005. The decision in the case of M/s Sumitomo Corporation India Pvt. Ltd. Versus CST, Delhi (Vice-Versa) 2017 (3) TMI 1366 - CESTAT NEW DELHI covers the issue, where it was held that the services have been provided to foreign entities as per the agreement entered into and the beneficiary is such foreign entities. The amount as consideration for such services was also paid by the said foreign entities in convertible foreign exchange. Therefore, the services rendered by the appellants are squarely covered by the Export of Service Rules and there is no service tax liability on them. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against order upholding service tax demand for business auxiliary services provided to a foreign firm in India - Interpretation of export of service rules - Compliance with conditions for export service - Consideration of Circular No. 111/5/2009-ST - Pre-deposit requirement for appeal before Commissioner (Appeals) - Applicability of Circular on services used outside India - Comparison with previous Tribunal decisions on similar issues.

Analysis:
The appeal challenged an order upholding a service tax demand on the appellant for providing business auxiliary services to a foreign firm in India. The appellant, a registered service tax assessee, entered into agreements with a foreign firm for commercial advisory services, receiving commission in convertible foreign exchange. The department alleged taxable services under the Business Auxiliary Services category, consumed in India by the foreign firm, leading to a service tax demand. The Commissioner (Appeals) rejected the appellant's appeal for non-compliance with a pre-deposit requirement, leading to an appeal before the Tribunal. The Tribunal remanded the matter back to the Commissioner (Appeals) for a decision on merits without insisting on pre-deposit, resulting in the present impugned order.

The appellant argued that the impugned order failed to consider Circular No. 111/5/2009-ST, which clarified the possibility of service export even if activities occur in India but benefits accrue outside. Citing various Tribunal decisions, the appellant contended that acting as a commission agent for the foreign client constituted an export of service, satisfying conditions under the Export of Service Rules, 2005. The appellant emphasized that services used outside India, as per the Circular, included those related to business or commerce provided to a recipient outside India, with payment received in convertible foreign exchange.

In response, the Authorized Representative supported the impugned order's findings. Upon reviewing submissions and previous judgments, the Tribunal found that the appellant acted as a commission agent for the foreign recipient, satisfying conditions for services used outside India. Relying on Tribunal decisions, including the case of Sumitomo Corporation India Pvt. Ltd., the Tribunal held that services provided in India but used outside, with payment in convertible foreign exchange, qualified as export of services under the Rules, 2005. Citing the Microsoft Corporation case, the Tribunal concluded that the impugned order was unsustainable in law, setting it aside and allowing the appellant's appeal.

In conclusion, the Tribunal allowed the appellant's appeal, emphasizing compliance with export service rules and previous Tribunal decisions on similar issues. The judgment highlighted the importance of services used outside India, payment in convertible foreign exchange, and adherence to Circular No. 111/5/2009-ST in determining the export of services, ultimately leading to the decision in favor of the appellant.