2023 (3) TMI 500 - AT - Service Tax

Classification of services - Business Auxiliary Service (BAS) or Business Support Services (BSS) - rendering services to foreign companies for evaluation of prospective garment manufacturers processing purchase orders customer management tracking of delivery schedules operational assistance for marketing customer service pricing policies managing distribution logistics etc. - export of services or not - HELD THAT - It is found from a plain reading of clause (104c) of Section 65 that support services of business or commerce specifically relates to evaluation of prospective customers telemarketing processing of purchase orders and fulfilment services information and tracking of delivery schedules managing distribution and logistics etc. which were the activities undertaken by the appellant while the definition of business auxiliary service under clause (19) of Section 65 of the Act is more general in nature. Hence the services have been correctly classified under the specific heading of support services of business or commerce and does not require us to traverse through section 65A(2) of the Finance Act 1994. This Hon ble Tribunal s judgment in the case of the appellant in M/s. Fifth Avenue v. Commissioner of Service Tax Chennai 2009 (3) TMI 133 - CESTAT CHENNAI and referred to by Revenue has at paragraph 4.1 clearly found without ambiguity that the services rendered to the vendors and the companies by the appellants therein conformed to the statutory definition of SSBC and hence the services rendered to the vendors and companies were classifiable under SSBC and not under BAS. Hence section 65A of the Finance Act 1994 was not required to be discussed in the order. As regards Revenue s claim that the LC margin retained by FASPL was nothing but consideration received for the marketing services rendered for vendors and identification and procurement services rendered to the buyers and hence could not be classified as export of service - it is found that the matter has also been examined in detail by the Hon ble Tribunal in M/S. FIFTH AVENUE SOURCING PVT. LIMITED VERSUS CST CHENNAI 2017 (9) TMI 895 - CESTAT CHENNAI . The issue hence does not survive for fresh consideration. Appeal allowed.

Summary

Issues:
1. Classification of services as Business Auxiliary Service (BAS) or Business Support Services (BSS).
2. Tax liability on services rendered by the appellant to foreign customers.
3. Application of Export of Service Rules, 2005.
4. Limitation period for issuing Show Cause Notices.
5. Interpretation of Section 65A of the Finance Act, 1994.

Issue 1: Classification of services as BAS or BSS
The case involved M/s. Fifth Avenue Sourcing Pvt. Ltd. (FASPL) providing services to foreign and domestic companies. The Revenue contended that the services fell under Business Auxiliary Service (BAS) category, subject to service tax. FASPL argued that the services should be classified as Business Support Services (BSS) and treated as export of services. The Tribunal previously ruled in favor of FASPL, stating that the services should be considered as BSS and not BAS, fulfilling conditions for export of services.

Issue 2: Tax liability on services to foreign customers
FASPL maintained that the services provided to foreign clients constituted export of services under the Export of Service Rules, 2005. The Revenue argued that certain margins retained by FASPL were not for export of services but for marketing services to vendors and procurement services to buyers. However, the Tribunal found that the services met the criteria for export of services, and no tax liability was justified.

Issue 3: Application of Export of Service Rules, 2005
FASPL contended that the services provided to foreign clients should be treated as export of services under the Export of Service Rules, 2005. The Tribunal agreed, emphasizing that the consideration was paid in convertible foreign exchange, meeting the conditions for export of services.

Issue 4: Limitation period for issuing Show Cause Notices
FASPL argued that the subsequent Show Cause Notices were not sustainable as an earlier notice had been decided in their favor. They cited the case law to support their position that the demand was hit by limitation due to the issuance of previous notices.

Issue 5: Interpretation of Section 65A of the Finance Act, 1994
The Revenue claimed that the Tribunal did not consider Section 65A of the Finance Act, 1994, in classifying the services. However, the Tribunal clarified that the services were correctly classified under the specific heading of 'support services of business or commerce' without the need to analyze Section 65A(2). The previous Tribunal judgment supported this classification, and the matter did not require fresh consideration.

In conclusion, the Tribunal set aside the impugned orders, allowing the appeals filed by FASPL and providing consequential relief as per law.