2017 (8) TMI 1050 - AT - Service Tax

Export of services - promotion and marketing of spares and accessories of Yamazaki Mazak Trading Corporation, Japan(YMTCJ) and they have received commissioner from YMTCJ - appellants are involved in various activities in India on behalf of the foreign principals for a consideration - extended period of limitation - Held that - it is apparent in terms of circular dated 24-2-2009, the Indian agent who undertake marketing in India of goods of foreign seller and received the commission for the service in convertible foreign exchange would qualify for the benefit of export of service. The period covered in the instant case is 1-1-2009 to 26-2-2010 - It is seen that the impugned order relies on the circular dated 13-5-2011 to interpret phrase use outside India to ascertain if the said services qualifies as export service. The circular dated 24-2-2009 simply prescribed that the said service qualifies as exports if recipient is located outside India. In this circumstances appellant s claimed that they had bonafide belief on the strength of these circular dated 24-2-2009 cannot be dislodged. Circular date 24-2-2009 clearly held that in the case of Business auxiliary services provided by Indian Agent who undertakes marketing in India of goods of foreign seller and received the commission for service in convertible foreign exchange and where recipient is located out side India the same would qualify as export of service. In view of the above extended period of limitation cannot be invoked in the instant case. Reliance placed in the case of Microsoft Corporation (India) Pvt. Ltd 2014 (10) TMI 200 - CESTAT NEW DELHI (LB) , where it was held that The service being provided may or may not result in any sales of the product in Indian soil. The transactions and activities between the appellant and Singapore principal company are the disputed activities. As such, the services are being provided by the appellant to Singapore Recipient company and to be used by them at Singapore, may be for the purpose of the sale of their product in India, have to be held as export of services. The services provided by the appellant qualify as export of service - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Confirmation of demand of service tax.
2. Imposition of penalty under Section 77 and 78 of Finance Act, 1994.
3. Qualification of services as export of service.
4. Applicability of extended period of limitation.

Issue-wise Detailed Analysis:

1. Confirmation of Demand of Service Tax:
The appeal was filed by M/s. Yamazaki Mazak India Pvt Ltd against the confirmation of demand of service tax. The appellant argued that they were engaged in the promotion and marketing of spares and accessories for Yamazaki Mazak Trading Corporation, Japan (YMTCJ) and Yamazaki Mazak Singapore Pte. Ltd (YMSPL). They contended that these services qualify as export of service, relying on Circular No.111/5/2009 dated 24-2-2009 and Circular No.141/10/2011-TRU dated 13-5-2011. The appellant cited previous Tribunal decisions, including Bobst India Pvt Ltd and Microsoft Corporation (I) (P) Ltd, to support their claim that no tax can be demanded on these services.

2. Imposition of Penalty under Section 77 and 78 of Finance Act, 1994:
The appellant also contested the imposition of penalties under Section 77 and 78 of the Finance Act, 1994, arguing that they had a bona fide belief that their services were export services, as supported by the CBEC Circular dated 24-2-2009. They referenced decisions in National Engineering Industries Ltd Vs. CCE, Jaipur and Pam Pharma & Allied Machinery Co. P. Ltd Vs. CST, Mumbai to argue against the invocation of the extended period of limitation.

3. Qualification of Services as Export of Service:
The Tribunal examined the agreements between the appellant and YMTCJ and YMSPL, noting that the appellant was involved in various activities in India on behalf of foreign principals for a consideration. The Tribunal referred to the CBEC Circular dated 24-2-2009, which clarified that services provided by Indian agents for marketing goods of a foreign seller and receiving commission in convertible foreign exchange qualify as export of service. The Tribunal also considered Circular No.141/10/2011-TRU dated 13-5-2011, which elaborated on the meaning of 'accrual of benefit' and 'use outside India.' The Tribunal concluded that the services provided by the appellant qualify as export of service, as the benefit of these services accrues outside India.

4. Applicability of Extended Period of Limitation:
The Tribunal noted that the impugned order relied on the circular dated 13-5-2011 to interpret the phrase "use outside India." However, the circular dated 24-2-2009 clearly held that services provided by Indian agents for marketing goods of a foreign seller and receiving commission in convertible foreign exchange qualify as export of service. The Tribunal concluded that the appellant's claim of bona fide belief based on the circular dated 24-2-2009 was valid, and therefore, the extended period of limitation could not be invoked.

Conclusion:
The Tribunal, relying on previous decisions and the relevant circulars, held that the services provided by the appellant qualify as export of service. Consequently, the appeal was allowed, and the demand of service tax and imposition of penalties were set aside. The Tribunal pronounced the judgment in court on 12.7.17.