2015 (2) TMI 241 - AT - Service Tax

Business Auxiliary Services - whether the appellant is to be saddled with the service tax liability on an amount received by them as commission for procuring orders on behalf of overseas manufacturers - Held that - Appellant does not engaged himself in assembling and organizing of the imports. His duty as is ascertained from the agreement, indicates that he is supposed to procure the orders and pass it on to the overseas manufacturers; on receipt of such orders, the overseas manufacturers executes the same on his own and the consideration for such supplies is directly paid to the overseas manufacturers by the person who has placed the order. The entire transaction in our considered opinion seems to be of only procurement of orders and the rendering of services, if any, by the appellant is towards the foreign or overseas manufacturers. In our view, this activity though culminates in supplies to Indian Company, cannot be considered as services provided in India. We are fortified in our view by the ratio of the Tribunal in the case of Vodafone Essar Cellular Ltd. (2013 (7) TMI 178 - CESTAT MUMBAI). When the service provided by a person in India is consumed and used by a person abroad, co-ordinate Bench relied upon the judgement of the Paul Merchants Ltd. 2012 (12) TMI 424 - CESTAT, DELHI (LB) ; interpreting provisions of export of services rules to hold such services as rendered by M/s. GAP International Sourcing (India) Pvt. Ltd. 2014 (3) TMI 696 - CESTAT NEW DELHI , would be export of services and would not fall under the category of BAS. - impugned order is unsustainable and liable to set aside and we do so - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant is liable for service tax under "Business Auxiliary Services" for receiving commission from foreign companies.

Analysis:

Issue 1: Liability for Service Tax
The appeal challenged an Order-in-Original passed by the Commissioner of Service Tax, Mumbai-II, holding the appellant liable for service tax under "Business Auxiliary Services" for receiving commission from foreign companies. The CERA audit party alleged that the appellant's activities fell under the promotion or marketing of goods/services category. Despite the appellant's detailed response, the audit party issued a show-cause notice demanding service tax of Rs. 5,32,96,615 along with interest and penalties. The adjudicating authority upheld the demand, leading to the appeal. The appellant argued that their role was limited to procuring orders and passing them to overseas manufacturers, who then executed the orders and paid the commission directly. They cited various cases where similar issues were decided in favor of the assessee.

Issue 2: Adjudication and Arguments
The appellant's counsel highlighted that the appellant's duties were solely to procure orders and not involved in assembling or organizing imports. They emphasized that the services provided by the appellant were directed towards the foreign manufacturers, and the transaction did not constitute services provided in India. The departmental representative contended that the appellant did not dispute procuring orders and providing services related to the sale of goods in India. The counsel refuted the adjudicating authority's findings regarding assembling and organizing imports and collecting receivables from clients, presenting their arguments made before the lower authorities.

Issue 3: Judicial Precedents
The Tribunal analyzed various judicial precedents, including cases like Vodafone Essar Cellular Ltd., Paul Merchants Ltd., Microsoft Corporation Indian Private Ltd., and others. These cases discussed the interpretation of export of services rules and the applicability of service tax based on the consumption and location of services. The Tribunal referred to the principles of equivalence between taxation of goods and services and the destination-based consumption tax. The decisions in these cases favored the assessee, emphasizing that services consumed abroad are not taxable in India.

Conclusion
After considering the submissions and precedents, the Tribunal held that the appellant's activities constituted export of services and were not liable for service tax under Business Auxiliary Services. Citing previous rulings and the nature of the appellant's role in procuring orders for overseas manufacturers, the impugned order was set aside, and the appeal was allowed. The judgment highlighted the distinction between services provided in India and services consumed abroad, leading to the decision in favor of the appellant.