2014 (4) TMI 360 - AT - Service Tax

Business Auxiliary services - Place of business is India - export of services or not - Held that - Appellant procured sales orders in India on commission basis for the goods manufactured by M/s. Coperion Werner pfleiderer Gmbh Co. KG, Germany and M/s. Coperion Waeschle Gmbh, Germany, the manufacturers of bulk handling systems and the service provided by the Appellant is Business Auxiliary Service covered by Section 65 (105)(zzb). This service provided by a person in India is treated as export of services out of India if it has been provided in relation to business or commission to a recipient located outside India, the service has been used outside India and payment for the same has been received in convertible foreign exchange. Prima facie, we find that all these three conditions have been satisfied in this case. The services being in relation to business or commerce, the question of their export would be decided on the basis of location of the person using these services for his business, not on the basis of place of performance - appellant have prima facie case in their favour - Stay granted.

Summary

Issues:
Taxability of services provided by the appellant in India as export of service under Business Auxiliary services category.

Analysis:
The appellant provided services of procuring sales orders for manufacturers based in Germany, which were considered as Business Auxiliary services. The department contended that since the services were performed in India, they should be taxable in India and not treated as export of service. The Commissioner confirmed a service tax demand against the appellant along with interest and penalties. The appellant argued that the services were covered under Rule 3(1)(iii) of the Export of Services Rules, 2005, as they were received by entities abroad for use in their business and payment was made in convertible foreign currency. The appellant cited a Tribunal judgment in a similar case to support their claim. The department opposed the stay application, emphasizing that the services were performed in India and did not qualify as export of service. However, the Tribunal found that the services met the conditions for export of service, including being used outside India and payment received in foreign exchange. The Tribunal also noted that the location of the recipient, not the place of performance, determined the export status. Given the prima facie case in favor of the appellant and the precedent set by a previous Tribunal judgment, the requirement for pre-deposit of service tax demand, interest, and penalty was waived, and recovery was stayed pending appeal. The stay application was allowed.