2011 (3) TMI 805 - AT - Service Tax

Repatriation of Foreign exchange - Export of services - Market Research Services - Reconsideration of earlier order directing the assessee to pre-deposit Rs. 35 lakhs in pursuance of high court order - held that - there is no dispute that the transaction in question would have been exempted from payment of Service Tax but for the repatriation of sizeable amounts by the appellant to the service recipients abroad. - The relevant Notifications, which were in force during the period of dispute, clearly stipulated that benefit of exemption from payment of service tax would not be available to export of taxable services where the consideration received in foreign exchange for the services was subsequently repatriated. Prima facie, the appellant was not eligible for exemption and hence the demand of Service Tax is sustainable. - The appellant directed to pre-deposit only an amount of Rs. 35 lakhs

Summary

Issues:
1. Consideration of pre-deposit under Section 35F of the Central Excise Act.
2. Determination of taxable service in transactions with overseas clients.
3. Allegations of repatriation of funds and nexus with "market research service".
4. Burden of proof on the appellant to refute allegations.
5. Examination of agreements and invoices to establish defense.
6. Prima facie case for demand of Service Tax under "Market Research Agency's Services".
7. Apportionment of Service Tax amount and quantification.
8. Grounds for invoking extended period of limitation and penalty under Section 78.

Analysis:

1. The judgment pertains to a remand order from the Hon'ble High Court of Bombay directing fresh consideration on the pre-deposit of Rs. 35 lakhs under Section 35F of the Central Excise Act. The appellant challenged the pre-deposit order, leading to a review of whether the appellant should be directed to make any pre-deposit of Service Tax demanded under the head "Market Research Services".

2. The appellant's counsel argued that no taxable service was involved in transactions with overseas clients, specifically WNS UK and WNS NA. The appellant contended that the payments made to these entities were not related to "market research service" and that there was no export of such services. The appellant highlighted their business activities involving back office support services and data management for overseas clients, emphasizing the lack of registration for "Market Research Services" during the disputed period.

3. The Revenue alleged that significant amounts were repatriated by the appellant to overseas companies, forming the basis for the demand of Service Tax under "Market Research Services". The burden of proof was on the appellant to refute these allegations and establish a defense. The appellant's reply to the show-cause notice focused on distinguishing between 'payment' and 'repatriation' without effectively disproving the nexus between payments and the alleged services.

4. The Tribunal analyzed the agreements and invoices provided by the appellant, indicating the nature of services and payments involved. However, the appellant failed to demonstrate a valid defense against the allegations raised in the show-cause notice. The Tribunal concluded that a prima facie case existed for the demand of Service Tax under "Market Research Agency's Services" due to the repatriation of funds to overseas recipients.

5. The quantification of the Service Tax amount under "Market Research Services" was detailed in Annexure-III of the show-cause notice. The Tribunal upheld the demand of Rs. 34,01,061/- for the specified period, considering the lack of substantial challenge against the quantification.

6. Regarding the plea of time-bar and penalty under Section 78 of the Finance Act, 1994, the Tribunal noted the grounds for invoking the extended period of limitation and penalty. The appellant was directed to pre-deposit an amount of Rs. 35 lakhs within a specified timeframe, considering the financial hardships claimed by the appellant's counsel, albeit without supporting documentary evidence.

7. The judgment highlighted the legal proceedings, arguments presented by both parties, and the Tribunal's decision based on the evidence and contentions raised during the hearing.