2014 (7) TMI 120 - AT - Service Tax

Export of service - Business Auxiliary Service - business of money transfers - assessees had provided Business Auxiliary Service (BAS) to either the principal Indian agent, or wherever the assessees are the principal agent to the overseas entity which is in the business of money transfers - Commissioner deleted penalty u/s 76 - Held that - There is no dispute that as a consequence of the ratio discernable from the judgement of the Larger Bench in Paul Merchant Ltd. principal agents and sub-agents of M/s Western Union Ltd. and similarly circumstanced foreign Money Transfer entities are not liable to service tax under provisions of the Act; since the services provided by these agents amounts to export of services and these are exempted from the levy of Service Tax under the Export of Service Rules 2005. As on date the decision of the Larger Bench in Paul Merchant Ltd. 2012 (12) TMI 424 - CESTAT, DELHI (LB) is extant and operative and has not suffered any appellate eclipse - Decided in favour of assessee

Summary

Issues Involved:
1. Whether the appellants providing money transfer services are liable to pay service tax.
2. Whether penalties imposed under Section 76 and Section 78 are valid.
3. Application of Export of Service Rules, 2005 to the appeals.
4. Interpretation of the judgment in Paul Merchant Ltd. case regarding service tax liability.

Analysis:
1. The appellants, acting as principal agents or sub-agents of overseas entities offering money transfer services, were involved in appeals against orders imposing service tax, interest, and penalties. The Revenue also appealed against the deletion of penalties under Section 76. The Tribunal noted that the services provided by these agents could be considered as export of services under the Export of Service Rules, 2005. The Tribunal referred to the judgment in Paul Merchant Ltd., which established that agents of foreign money transfer entities are not liable for service tax. Consequently, the appeals were allowed based on this precedent, and no costs were awarded.

2. The Tribunal addressed the issue of penalties imposed under Section 76 and Section 78. It was highlighted that penalties under Section 76 were not applicable if penalties under Section 78 were already imposed. The appeals by the Revenue were primarily focused on penalties imposed under Section 76, which were deemed inapplicable based on the circumstances and legal provisions discussed in the judgment.

3. The Tribunal also considered the application of the Export of Service Rules, 2005 to the appeals. Some of the Revenue's appeals were against orders that allowed the assessees' appeals by applying these rules. The Tribunal's decision to allow the appeals of the appellants providing money transfer services was based on the exemption provided under these rules for services considered as exports.

4. The judgment in the Paul Merchant Ltd. case played a crucial role in determining the service tax liability of the appellants in this case. The Tribunal emphasized that the decision of the Larger Bench in the Paul Merchant Ltd. case, which exempted principal and sub-agents of foreign money transfer entities from service tax, was still valid and binding. Therefore, considering this precedent and the nature of services provided by the appellants, the Tribunal concluded that they were not liable for service tax under the current legal framework.