2024 (6) TMI 388 - AT - Central Excise

Levy of service tax - business auxiliary services - amount received from VISA and Mastercard - mutual benefit of both the parties - interpretation of cost-sharing agreement - export of services under Rule 3(1)(iii) of the Export of Service Rules, 2005 - extended period of limitation. Levy of service tax - HELD THAT - The said agreement is basically nothing but cost-sharing agreement. Further, we find that Revenue wants to tax under business auxiliary service whereas the services provided by the appellant relates to promotion of the brand of VISA/Mastercard and not any product/service provided by VISA/Mastercard. Further, the business auxiliary services are covered under the category of III services as per Rule 3(1)(iii) of export of service Rules and the service failing under 3(1)(iii) should be seen qua the person receiving the service and not the place of performance of the service. Further, this issue is no more res integra and has been settled in various cases relied upon by the appellant s own case SBI CARDS AND PAYMENT SERVICES PVT. LTD. VERSUS C.S.T. DELHI 2017 (12) TMI 237 - CESTAT NEW DELHI where it was held that Even for the period afier 1st July 2012 the provision of telecommunication service by Vertzon India to Verizon US satisfied the conditions under Rule 6A (1) (a), (b), (d) and (e) of the ST Rules and was therefore an 'export of service. The amount received for the export of service was not amenable to service tax. The impugned order is not sustainable - appeal allowed.

Issues Involved:
1. Liability to pay service tax on amounts received from VISA and Mastercard under 'business auxiliary services'.
2. Interpretation of cost-sharing agreements and their tax implications.
3. Classification of services as export of services under Rule 3(1)(iii) of the Export of Service Rules, 2005.
4. Invocation of the extended period for issuing show cause notices.

Summary:

1. Liability to Pay Service Tax:
The Department contended that the appellant was liable to pay service tax on amounts received from VISA and Mastercard under 'business auxiliary services'. The appellant argued that they were not providing any service to VISA/Mastercard but were engaged in a cost-sharing agreement for promoting their own credit card services, which also benefited VISA/Mastercard.

2. Interpretation of Cost-Sharing Agreements:
The appellant maintained that the agreements with VISA/Mastercard were cost-sharing arrangements for marketing and advertising credit cards, not for providing services to VISA/Mastercard. The Tribunal found that the agreements were indeed cost-sharing agreements and not for business promotion of VISA/Mastercard.

3. Classification as Export of Services:
The appellant argued that the services provided to VISA/Mastercard qualified as export of services under Rule 3(1)(iii) of the Export of Service Rules, 2005. The Tribunal agreed, noting that the services were provided to entities located outside India, and the benefit of the service accrued outside India. The Tribunal referenced several judgments, including the appellant's own case, which had previously held that such services qualified as export of services.

4. Invocation of Extended Period:
The appellant contended that the extended period for issuing show cause notices was wrongly invoked, as they had a bona fide belief that they were not liable to pay service tax and had been filing returns on time. The Tribunal did not specifically address this issue in detail but focused on the nature of the services and their classification as export of services.

Conclusion:
The Tribunal concluded that the services provided by the appellant were indeed export of services and not liable to service tax under 'business auxiliary services'. The impugned orders were set aside, and the appeals were allowed with consequential relief as per law. The Tribunal emphasized that the Department could not take contrary stands on the same issue for the same assessee, referencing the appellant's previous case where similar services were held to be export of services.

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