2020 (1) TMI 316 - AT - Service Tax

Classification of services - Business Auxiliary Services or not - export of services - CBEC Circular No. 111/05/2009-ST dated 24.02.2009 - services rendered relating to sales promotion of the specified products produced by their parent company, Fanuc Ltd., Japan and the said services fall within the ambit of Business Auxiliary Services - HELD THAT - The services are rendered to Fanuc Ltd., Japan by the appellants. The beneficiary of the service is situated outside India and the services rendered in India. It is not disputed that the remuneration was paid in convertible foreign exchange - also, CBEC vide Circular No. 56/5/2003-ST dated 25th April, 2003 has clarified that Service Tax is destination-based consumption tax and is not applicable on export of services; export of services would continue to remain tax free even after withdrawal of Notification No. 06/99 dated 09.04.1999. This Bench s decision in the case of MAPAL INDIA PVT. LTD. VERSUS COMMISSIONER OF C. EX., BANGALORE 2010 (8) TMI 622 - CESTAT, BANGALORE and other cases cited by the appellants, hold that the services such as rendered by the appellants to their foreign principal fall under Export of Service Rules and are eligible for exemption in terms of Notifications, Export of Service Rules and the Circulars issued by CBEC from time to time for the entire period i.e. 01.07.2003 to 19.11.2003, 15.03.2005 to 30.09.2007 and 01.10.2007 to 30.09.2008 - Therefore, the issue is no longer res integra and the appellants are not liable to pay Service Tax during the said period under the heading Business Auxiliary Service . Maintenance or Repair Services - period 01.10.2007 to 30.09.2008 - penalties - HELD THAT - The Learned Counsel for the appellants fairly conceded the applicability of such tax. Therefore, there are no reasons to discuss the applicability of the same - However, as requested by the appellants, looking into the facts and the circumstances of the case, the penalties are set aside. Appeal allowed in part.

Summary

Issues:
1. Allegation of rendering services falling under 'Business Auxiliary Services' and 'Maintenance or Repair Services'.
2. Dispute regarding Service Tax demands for the periods specified.
3. Interpretation of Export of Service Rules, 2005 and relevant Circulars.
4. Applicability of exemptions and conditions under the Export of Service Rules.
5. Analysis of judgments and Circulars supporting the appellant's position.
6. Decision on the liability to pay Service Tax under 'Business Auxiliary Services'.
7. Decision on the liability to pay Service Tax under 'Maintenance or Repair Services'.
8. Consideration of penalties imposed.

Detailed Analysis:
1. The appellant, a manufacturer of CNC Systems, faced allegations of providing services related to sales promotion, maintenance, and repair services. The Department issued Show Cause Notices (SCNs) demanding Service Tax for specific periods.
2. The appellant argued that the impugned order contradicted Export of Service Rules, 2005, and relevant Circulars. They cited legal precedents and Circulars to support their claim of services being exported.
3. The appellant highlighted that exemptions existed for services rendered to a foreign recipient and paid in convertible foreign exchange. They emphasized the availability of exemptions until a certain date based on Notifications and Circulars.
4. The appellant discussed the criteria under the Export of Service Rules, emphasizing conditions for considering services as exports. They contended that their services met the criteria for exemption.
5. Legal arguments included references to Circulars clarifying the tax treatment of exported services. The appellant relied on previous judgments supporting their position on the export of services.
6. The Tribunal analyzed the Consignment Sales Agreement and confirmed that services were rendered to a foreign entity outside India, meeting the criteria for exemption under the Export of Service Rules.
7. The Tribunal upheld the demand for 'Maintenance or Repair Services' for a specific period but set aside penalties considering the continuous changes in laws and interpretations.
8. The final decision set aside Service Tax demands under 'Business Auxiliary Services' and partially allowed one appeal while upholding the demand for 'Maintenance or Repair Services' but setting aside penalties.

This detailed analysis covers the issues raised, legal arguments presented, and the Tribunal's decision regarding the Service Tax demands and penalties in the case.