2012 (4) TMI 196 - AT - Service Tax

Stay of Demand - Department is of the view that the service provided by the applicant to M/s. Tata Johnson Controls Automotive Ltd. are not received in convertible foreign exchange and therefore, are liable to service tax - It is contended on behalf of the applicant that the applicant are entitled for the benefit of circular no. 56/5/2003-ST dated 25.4.2003 - As per the said circular, service provided by the applicant to M/s. Tata Johnson Controls Automotive Ltd. get merged in the service provided by M/s. Tata Johnson Controls Automotive Ltd. in their service exported outside India - Pre-deposit waived.

Summary

Issues:
Interpretation of circular no. 56/5/2003-ST dated 25.4.2003 regarding taxability of secondary services used for exporting services.

Analysis:
The case involved the activity of providing consultant engineering services to a company engaged in exporting engineering and designing services outside India. The Department contended that the services provided were not received in convertible foreign exchange, making them liable for service tax, leading to the issuance of show-cause notices and demands with penalties. The applicants argued that they were entitled to the benefit of circular no. 56/5/2003-ST dated 25.4.2003, which exempts secondary services used for exporting services from service tax.

Upon reviewing the circular, the Tribunal noted that when secondary services are merged with the services being exported, no service tax is leviable on those secondary services. The Tribunal found that the services provided by the applicants to the exporting company were indeed merging with the exported services, as per the circular. Consequently, the Tribunal held that the applicants were entitled to the benefit of the circular. Consequently, the Tribunal granted a waiver of the entire amount of service tax, interest, and penalties, staying the demand during the appeal process.