2018 (7) TMI 1010 - AT - Service Tax

Business Auxiliary Service - STAR L appointed and engaged the appellant as their exclusive sales agent - Export of services or not? - Held that - The conditionalities of Rule 3 of Export of Services Rules, 2005 are not fully satisfied since services are provided only within India - This controversy has now been fully settled by the case laws of higher appellate forums which have consistently held that if other requirements of Rule 3 are satisfied and the only niggle is that the services have been provided in India, this should be considered as Export of Service , notwithstanding the Board s circulars - the impugned services provided by appellant to STAR L will have to be treated as Export of Service and hence there would be no tax liability on the same - demand set aside. CENVAT Credit - Mediclaim and Accident Insurance Policy - denial on account of nexus - Held that - he issue is amply covered by the Tribunal decision in CCE Bangalore-III Vs Stanzen Toyotetsu India (P) Ltd. 2011 (4) TMI 201 - KARNATAKA HIGH COURT where the Hon ble Karnataka High Court, inter alia held that credit on Group Insurance Policy taken by assessee has to be construed as activities relating to business and hence credit is to that extent is permissible - credit allowed. Appeal allowed in toto.

Summary

Issues involved:
1. Tax liability on commission amounts under 'Business Auxiliary Service'
2. Eligibility of cenvat credit for Mediclaim and Accident Insurance Policy

Analysis:

Issue 1: Tax liability on commission amounts under 'Business Auxiliary Service'
The appellant was engaged in various services, including acting as an agent for a Hong Kong company for solicitation of advertising, collection, and remittance of advertisement fees. The department claimed that the appellant should discharge service tax liability on these commission amounts under 'Business Auxiliary Service.' The impugned order demanded payment of a significant amount along with interest and imposed a penalty. The appellant contended that they have been discharging service tax liability under 'Broadcasting Agency Service' and argued that even if the service rendered could be categorized as Business Auxiliary Service, they had met the conditions of Rule 3 of Export of Services Rules, 2005, making it an export of service. The Tribunal analyzed the contentions and held that the services provided by the appellant to the Hong Kong company should be treated as an 'Export of Service,' thereby nullifying the tax liability imposed. The Tribunal cited precedents and clarified that the location of the service receiver, not the place of performance, is crucial in determining the taxability of such services.

Issue 2: Eligibility of cenvat credit for Mediclaim and Accident Insurance Policy
Regarding the disputed credit amount for Mediclaim and Accident Insurance Policy, the appellant argued that these services were availed before a certain date and were eligible input services under Rule 2(l) of the CCR. The department, however, supported the impugned order and cited relevant circulars to justify their position. The Tribunal examined the issue and referred to a precedent where the High Court held that credit on Group Insurance Policy should be construed as activities relating to business, making the credit permissible. Consequently, the Tribunal set aside the demand for the disputed credit amount along with the penalty imposed, in favor of the appellant.

In conclusion, the Tribunal allowed the appeal in its entirety, ruling in favor of the appellant on both issues. The decision was based on the classification of services as an 'Export of Service' and the eligibility of the disputed credit amount, as supported by legal precedents and interpretations of relevant rules and circulars.