2019 (2) TMI 674 - AT - Service Tax

Classification of services - Business Auxiliary Services or not - appellant has been engaged in marketing support services for M/s TFL Ledertechnik, GmBH Co Germany and has been receiving a commission of 7% on the sale proceeds in foreign exchange - export of services or not - Held that - A plain reading of the nature of services rendered by the appellant makes it clear that they are meant for promoting the business of their client M/s TFL Ledertechnik, GmBH Co Germany and the services clearly fall under the definition of Business Auxiliary Services - Such services fall under the category III of the Export of Service Rules 2005 and since they are provided in relation to the business or commerce of the service recipient located outside India, they amount to export of services. No service tax is chargeable on the services rendered by the appellant as per Rule 4 of Export of Services Rules. Consequently no interest is leviable and no penalty is imposable on the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of services provided by the appellant for marketing support, classification under "Business Auxiliary Services," applicability of service tax, and determination of export of services under the Export of Service Rules 2005.

Analysis:
The appellant engaged in marketing support services for a foreign company, receiving a commission on sales proceeds. The services included representing the interests of the foreign company in business relationships, negotiating with authorities, maintaining office premises, and complying with directions. A show cause notice was issued, classifying the services as "Business Auxiliary Services" for service tax purposes.

The appellant argued that the services were covered under Rule 3(1)(iii) of the Export of Service Rules 2005, as they helped the foreign company market its goods in India, resulting in orders and payment in foreign exchange. The appellant relied on circular No. 111/05/2009-ST to support their claim that the services fell under Category III of exportable services, provided in relation to business or commerce to a recipient outside India.

The Tribunal considered the nature of services rendered by the appellant and concluded that they fell under "Business Auxiliary Services" and Category III of the Export of Service Rules. As the services were provided in relation to the business of the foreign company located outside India, they constituted export of services under Rule 4 of the Export of Service Rules. Therefore, no service tax, interest, or penalty was chargeable on the appellant for the services rendered.

Additionally, the Tribunal noted that for subsequent periods, the demands were dropped by the appellate and adjudicating authorities, which were unchallenged by the Department, indicating finality. As a result, the impugned order demanding service tax, interest, and penalty was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, determining that the services provided for marketing support constituted export of services under the Export of Service Rules 2005, exempting them from service tax, interest, and penalty.