2015 (1) TMI 459 - AT - Service Tax

Waiver of pre-deposit - Business auxiliary servcies - Export of services - Held that - Applicant is procuring purchase orders for their associates located outside India by conducting market survey. We do agree with the applicant that the services falls under the category of Business Auxiliary Service and as per the Export of Service Rules, 2005 the applicant s service falls under Rule 3 (1) (iii) of the said Rules. As per the said rules, the applicant is procuring the order for their associates located outside India, therefore the user of the service is located outside India. - applicant had complied with the condition of the Export of Service Rules, 2005 therefore the applicant has made out a case for total waiver of the pre-deposit. - Stay granted.

Summary

Issues:
Waiver of pre-deposit of service tax, interest, and penalties under the Finance Act, 1994 for procurement of sale orders in India for overseas group companies.

Analysis:
The judgment addresses the issue of waiver of pre-deposit of service tax, interest, and penalties imposed under the Finance Act, 1994 for the procurement of sale orders in India for overseas group companies. The applicant sought waiver of the demand, contending that the services provided fall under the category of Business Auxiliary Service and comply with the Export of Service Rules, 2005. The Revenue argued that the services were used in India, making the applicants liable for service tax under the reverse charge mechanism. However, the Tribunal found that the applicant procures purchase orders for their associates located outside India by conducting market surveys, thus meeting the conditions of Rule 3(1)(iii) of the Export of Service Rules, 2005. Consequently, the Tribunal agreed with the applicant's position that the user of the service is located outside India, justifying a total waiver of the pre-deposit. As a result, the Tribunal granted the waiver of the entire amount of service tax, interest, and penalties, staying the recovery during the appeal process.

This judgment underscores the importance of adhering to the Export of Service Rules, 2005 in determining the tax liability for services provided to overseas entities. By establishing that the applicant's services fall under the export category, the Tribunal concluded that the pre-deposit of the demanded amount should be waived. The decision highlights the significance of meeting the regulatory requirements and conditions specified under the relevant rules to substantiate claims for exemption or waiver of tax liabilities. The Tribunal's ruling reflects a balanced interpretation of the applicable laws and rules in the context of cross-border service transactions, emphasizing the need for clarity and compliance with the legal framework to avoid unnecessary tax burdens.