Export of Taxable Services - Services provided to foreign supplier of goods by a Commission Agent for goods to be supplied in India

This case involves a complicated but relevant problem being faced by many commission agents providing agency services to the foreign suppliers of the goods.

We hope that it would help to solve the ambiguity that is existing among service providers and department related to export.

Earlier, We have issued TMI-commentary with the title, "Applicability of Service Tax where the entire work of construction is being carried out by the developer and builder themselves and the ready built flats are being sold" with reference to Income Tax.

Here, we point out the relevant case law directly related to service tax and Export of Services Rules, 2005 decided by the CESTAT recently.

In the present case, the appellants filed a refund claim with the Department to the tune of Rs. 9,87,235/- on the ground that the services rendered by them amounts to Export of services in terms of Rule 3(2) of the Export of Services Rules, 2005 and, therefore, they are entitled for the refund of the Service Tax already paid by them.

The appellants actually book orders for their Principal in USA/UK/other countries. The orders are booked in India and after the orders are booked, the parties concerned directly get in touch with the foreign suppliers. Once the foreign suppliers export the goods to India and receive their payments, a commission is paid to the appellant. It was urged that the service which is rendered by the appellant amounts to Business Auxiliary Service. However, the service is provided from India and used outside India. Further, the payment for such service has been received in convertible foreign exchange. Department argued that the appellants are distributors of the various products of the foreign principals.  Department said that one cannot say that the services have been exported and the service is provided in India.

After hearing the matter, CESTAT held that,

"On a very careful consideration of the matter, I find that the appellants have produced documentary evidence to show that they had rendered the services to their foreign principals by booking orders in India for their goods. I have also perused the details of the refund application. They all relate to the goods supplied by the foreign principals based on the orders booked by the appellant. Moreover, in the Agreement relied on by the Revenue, para 9 relates to the services rendered by the appellant. This para has not been referred to by the Commissioner (Appeals) in his order at all. On the basis of the records, I am convinced that the services rendered have been exported in terms of Rule 3(2) of the Export of Services Rules, 2005. Hence, the appellants are entitled for the refund of the Service Tax already paid." 

(For full text of judgment - visit 2008 -TMI - 3606 - CESTAT BANGALORE)