9911796707
TMI Blog2014 (10) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... e activity of repair and maintenance of software was not taxable prior to 07.10.2005. So also the Adjudication was time barred and the Appellant was entitled to Cum-tax benefit and Cenvat Credit. It was also agitated that the appellant was not liable to penalty. With all these grievances prayer of the Appellant was to set aside the order of adjudication while Revenue opposes the same. ALLEGATIONS MADE IN SHOW CAUSE NOTICE (SCN) 2.1 Show Cause Notice (SCN) dated 24.04.2008 was issued to the appellant covering the period 09.07.2004 to 06.10.2005 making various allegations resulting in contravention of provisions of section 67 and section 69(1) read with section 68 and section 73 of the Act made by the appellant. It was alleged that there was failure of the appellant to seek registration as well as gross value of taxable service provided were incorrectly stated and the appellant failed to deposit service tax into the Government account as required by section 66 of the said Act. It was further alleged that there was failure to remit the service tax leviable within the stipulated time of the service rendered as required by section 68 of the Act read with rule 6 of the Service Tax Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall not solicit orders of agreements from outside the Territory. 2.2.3 Subsidiary may provide product support services, which may include standard Microsoft product support services for products which are generally made available to end-users and may include requests for support originating from the Territory. 2.3 MO's Duties. MO will use its best efforts to assist Subsidiary with technical matters in connection with the marketing of Microsoft Products and Services. 3. MARKETING OF MICROSOFT PRODUCTS 3.1 Marketing. Subsidiary shall have a non-exclusive right to market Microsoft Products in the Territory. 3.2 Subsidiary's Duties. Subsidiary will use its best efforts to further the interests of MO and to maximize the markets for Microsoft Products in the Territory. 3.2.1 Subsidiary shall not solicit orders or agreements from outside the Territory. In soliciting orders, Subsidiary shall only be authorized to inform customers of price, payment, delivery and other terms offered by MO in accordance with information received from MO or its affiliates, as appropriate. Unless otherwise authorized herein or otherwise agreed by the parties, Subsidiary shall not enter into any agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its duties, provided such expenses comply with Subsidiary's budget, as adjusted from time to time, and provided, further, such expenses are not already covered by another section of this Agreement or covered in another agreement between Subsidiary and MO or any MO affiliate. The reimbursement and additional compensation shall be exclusive of any applicable consumption tax such as a Value Added Tax or a Goods and Services Tax, which consumption tax shall be the responsibility of MO. 6.2 Marketing of Microsoft Products. For assistance in the marketing of Microsoft Products under Article 3, MO shall pay Subsidiary one hundred and fifteen percent (115%) of Subsidiary's actual expenses, less revenues, incurred in connection with its duties as defined in Article 3, provided such expenses comply with Subsidiarys budget, as adjusted from time to time, and provided, further, such expenses are not already covered by another section of this Agreement or covered in another agreement between Subsidiary and MSFT or any MSFT affiliate. Taxes, insurance, duties, freight and other charges not attributable to the Microsoft P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided elsewhere for which there was no export of services made within the meaning of Rule 3(1) (iii) of Export of Services Rule 2005 for the period 19-4-2006 to 31-5-2007. Further, for the period 1-6-2007 onwards the criterion of providing of service outside India being omitted from the law, the condition of service provided from India and used outside India still remained in force and the Appellant had not made any export of service. Such finding brought the appellant to the ambit of tax as 'Business Auxiliary service' provider. 4.2 The plea of export of service was discarded in adjudication elaborately discussing the same in Para 224 to 226 of the order which reads as under: 224. The notice has tried to make out a case that under the Market Development Agreement with M/s. M.O. Singapore they were providing Marketing support services. Even though with regard to Marketing Support Services, MCIPL creates services awareness of Microsoft products in India, they were delivered and used abroad in as much as in respect of these services with regard to the condition of services delivered outside India and used outside India, they submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers regarding marketing of Microsoft products, local advertising, performing other activities including dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry. These services once provided, are not capable of being used in a territory other than where they have been provided. In fact most of the time provision, delivery and use is happening simultaneously. It will be naive to even conceive that the above said services provided in India can even be delivered or used in a territory other than where these have been provided. 226 It has been stated in a number of circulars issued by the Board that Service Tax levy is a destination- based tax. This understanding follows similar understanding in some parts of the world. Particularly Europe, where the tax is levied at the place where the services are finally destined or used. The Indian Law, however, has clearly laid down that both the test of customers location and use should be satisfied. This will be clear from the following diagram : USER In India Outside India USE In India 1 (Taxable) 2 (Taxable) Outside India 3 (Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be drawn amongst the words 'user', 'beneficiary' and 'buyer' of a service. While many a times they are same, they may not be so in all the cases. The benefits in this case would definitely flow to Microsoft Singapore but that does not mean that services have been used outside India. 228. The Noticee has also given example of Call Centres/B.P.Os. where, according to the Noticee, the services are being considered as export on the ground that these are being provided to the recipients located abroad. The Noticee has, however, failed to cite any decided case law or adduce any other evidence, which could form the basis of coming to the conclusion that either the services of Call Centres/B.P.O.s are comparable to the services rendered by them or whether, if such a practice at all exists at some level, it has attained legal finality or precedential value for the determination of this case. Likewise, comparison made under Foreign Trade Development & Regulation Act, 1992 in respect of export of goods are of no avail as the export of goods is an entirely different matter governed by the lay specified elsewhere. 229. Moreov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Also the plea relating to repair and maintenance of software not liable to service tax for the period 9-7-04 to 6-10-05 was decided by the Adjudicating Authority against the appellant with the reason of his decision appearing in Para 237 of the impugned order. Point of limitation raised by the appellant was negatived by the learned adjudicating authority holding that the proceeding was not time barred for the reasons stated in Para 254 and 255 of the impugned order. Service tax liability was thereby determined by the ld. Commissioner with consequences of law to follow. SUBMISSIONS ON BEHALF OF APPELLANT 5.1 Ld. Sr. Counsel appearing for the appellant submitted that services provided by the Appellant in terms of agreement dated 1-7-2005 were export services. Board Circular issued on 24-2-2009 vide No. 111/05/2009-ST in terms of Para 1 (iii) of stated that Indian agents who undertake marketing in India of goods of a foreign seller, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign exchange and such services which would generally include knowledge or technique based services, which are not li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 3(1)(iii)], the relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for Category III services as per Rule 3(1)(iii) of Export of Services Rules, 2005, it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India. In all the illustrations mentioned in the opening paragraph, what is accruing outside India is the benefit in terms of promotion of business of a foreign company. Similar would be the treatment for other Category III [Rule 3(1)(iii)] services as well. 5.4 Ld. Sr. Counsel argued that service recipient being located outside India and that is not being disputed by Revenue; there was export of service which shall enjoy exemption under Rule 3 of Export Service Rules, 2005. Notwithstanding the place of performance of services if the service recipient is located outside India, the phrase 'used outside India' has to be interpreted to mean that the services are used outside India. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e utilized only outside India and therefore would be eligible for the benefit of export of services. 5.7 It was also submitted on behalf of the Appellant that the Id. Commissioner in the impugned order had clearly noticed that the service recipient is located outside India and does not have an office in India and the appellants have received the payment only in foreign exchange. In view of such finding, the entire demands relating to export of service needs to be set aside. 5.8 Demand relating to repair and maintenance service was pleaded to be hit by limitation for the reason that Show Cause Notice was issued on 24 April 2008 seeking differential tax for the period 9-7-2004 to 6-10-2005 on the following grounds : (a) The Central Board of Excise & Customs vide circular No. 70/19/03-ST dated 17-12-2003 was pleased to clarify that maintenance/repair service of computer software was not liable to tax since software are not goods. (b) The Ministry changed its stand vide circular No. 81/2/05-ST dated 7-10-2005 communicating that maintenance or repair or servicing of computer software is liable to service tax under section 65(105)(zzg) read with sec. 65(64) of the Finance Act 1994. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided to the customers in Indian Territory as concomitant to the supply of above products. Therefore by no innovative argument, the service provided in India can be converted into export of service. 6.3 It was further submitted by ld. Counsel for Revenue that the Export of Services Rules 2005 do not approve plea of export made by the Appellant in view of Circular No. 141/10/2011-TRU dated 13.05.2011. All circulars issued prior to 13.5.2011 do not alter law laid down by Apex Court in the case of Madras Marine & Co. v. State of Madras - 1992 (61) ELT 161 (SC) and also the law laid down in All India federation of tax Practitioners - 2007 (7) STR 625 (SC). Reliance placed on the citations by ld. Sr. counsel for the Appellant did not deal meaning of export under Constitutional provisions of Art. 286 and ratio laid down in Madras marine Judgment (supra). So also none of the decisions of the Tribunal dealt with the principles of equivalence as has been laid down in All India Federation of Tax Practitioners (supra). Therefore those citations are not profitable to the appellant. Board's Circulars no where stated that it had nullified orders of the Tribunal. It is misc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules nor the circulars permit the appellant to plead that there was export of services made by it. Latest circular dated 13.05.2001 removed the anomaly barring the plea of 'export' in absence of real export of service made by the appellant. Therefore plea of export made by the appellant has no basis under law. 6.7 It was further argument on behalf of Revenue that entire adjudication was proper and nothing was time barred. The appellant was liable to service tax, interest and penalty as has been levied in Adjudication. It is neither entitled to cum-tax benefit nor Cenvat credit and refunds if any granted shall not be basis to plead export of service. If refund was granted under error of law it is open to the Department to always pass appropriate order and direct the Appellant to pay back the same to the Treasury. Accordingly appeal of the appellant may be dismissed in liminie. FINDING AND DECISION OF TRIBUNAL 7. In order to redress grievance of both sides, the law relating to levy of service tax following principle of Equivalence and meaning of export is necessary to be dealt. PRINCIPLE OF EQUIVALENCE APPLICABLE TO LEVY OF SERVICE TAX 8.1 Law relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oadly in the earlier judgment of this Court in Godfrey Phillips India Ltd. v. State of U.P. [(2005 (2) SCC 515] in which a Constitution Bench observed that in the classical sense a tax is composed of two elements : the person, thing or activity on which tax is imposed. Thus, every tax may be levied on an object or on the event of taxation. Service tax is, thus, a tax on activity whereas sales tax is a tax on sale of a thing or goods [Emphasis supplied]. 8.2 While delivering judgment in the case of All India Fedn. of Tax Practitioners v. UOI - 2007 (7) STR 625 (S.C.), Apex Court noticed that Economics holds the view that there is no distinction between the consumption of goods and consumption of services as both satisfy the human needs (para-4 of the Judgment). In Para 6 and 7 the Hon'ble Court held as under : 6. At this stage, we may refer to the concept of 'Value Added Tax' (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer. 7. In the light of what is stated above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the Act was to fix rates under different entries including residuary entry. At this stage, we may say that the object of the Finance Act is also to fix rates of duty under different entries. However, the question which arose before this Court in Moti Laminates (supra) was the meaning of the word goods in Central Excise Act, 1944. This Court noticed that Section 3 of the 1944 Act levied duty on all excisable goods mentioned in the schedule provided they are produced and manufactured, therefore, this Court laid down the test that where goods are specified in the schedule they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the assessee. This Court further explained that the expression 'produced or manufactured' would mean that the goods produced must satisfy the test of saleability/marketability. The reason being that the duty under the 1944 Act is on manufacture/production but the manufacture/production is intended for taking such goods to the market for sale. It was observed that the obvious reason for levying excise duty linked with production or manufacture is that the goods so produced must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tertainment to the connoisseurs. For each show he plans and creates based on his skill, experience and training. In each show he undertakes an activity which is commercial and which he places before his audience for its consumption. The tax on service is levied for each show. This situation is very similar to a situation where goods are manufacture or produced with the intention of being cleared for home consumption under the Central Excise Act, 1944. This is how the principle of equivalence equates consumption of goods with consumption of services as both satisfy the human needs. In the case of Internet Service Provider, service tax is leviable for on-line information and database provided by web sites. But no service tax is leviable on E-commerce as there is no Database Access. 20. On the basis of the above discussion, it is clear that service tax is VAT which in turn is both a general tax as well as destination based consumption tax leviable on services provided within the country.(Emphasis supplied) 8.4 Applying the principle of equivalence as has been laid down by Apex Court, which is inbuilt into the concept of service tax under the Finance Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utside that termini for ending thereat, export can be said to have been made. The activity of promotion of market ended in India upon identification of customers and nothing travelled abroad to end there. 9.3 In the case of The State of Kerala and Others v. The Cochin Coal Company Ltd. - (1961) 12 STC 1 it has been held that concept of 'export' in Article 286(1)(b) of the Constitution postulated the existence of two termini as those between which the goods were intended to move or between which they were intended to be transported and not a mere movement of goods out of the country without any intention of their being landed in specie in some foreign port. It therefore follows that there should be two termini for export. Dominant object of contract between the parties was to promote market in the Territory of India to cater to the needs of the targeted consumers in the said territory and nothing to export. Accordingly plea of export of service by appellant is inconceivable. 9.4 In the present cases, market promotion was done by Appellant in the territory of India for sale of MICROSOFT products and rendering of technical support in that territory. Law laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide India shall be export. In the present case when market was promoted by the Appellant to bring MICROSOFT products and technical support into India in terms of the Agreement dated 1-7-2005, ultimate consumption of service was made in India and the appellant as agent of the foreign principal acted on its behalf in India. The circulars issued by CBE&C subscribe to the concept of 'export' as is stated in the Constitution and finds support from aforesaid decisions of Apex Court on the subject of export. It appears that Board has clear perception of such term having gained vast experience from law of Customs and Central Excise as well as Export & Import Policy. Service extincting in India when fails to move out of India that does not occasion export. Identification of customers in India brings an end to the promotion of market handicapping such promotion to travel abroad. Circulars do not appear to have made any approach contrary to such proposition. 9.7 It may also be stated that a Circular is not law by itself to bind a Court as has been held by five judges Bench of Apex Court in the case of CCE, Bolpur V. Ratan Melting & Wire Industries - 2008 (12) STR 416 (SC). Courts have to dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, appellant relied on various circulars i.e. 70/19/03/ST dated 17-12-2003 and 81/02/05 dated 7-10-2005. According to appellant, these circulars clarified that software was not considered to be goods for which maintenance thereof was not repair and maintenance for taxability. Such view survived for limited period from 17-12-2003 to 6-10-2005 when Circular No. 81/02/05 was issued to the contrary. By circular 81/02/05 software was made liable to service tax. Appellants plea was that it was eligible to the benefit of circulars during relevant period before issuance of show cause notice is not assailable and there shall not be liability to service tax on such service for the period prior to 7.10.2005. TIME BAR 11.1 So far as pleading of bar of limitation is concerned, it may be stated that imitation is counted in reverse order from the date of noticing of the fact of willful evasion, by the Taxing Authority. Facts of each case are tested on the touch stone of law and material facts of the case. 11.2 It was pleaded by learned Sr. Counsel that in terms of letter dated 4-10-2005 (Ref: page 47 of the Paper Book) the appellant informed learned Asst. Commissioner, Gurgaon about providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Foundation Jt. Venture v. Commissioner of Central Excise, 2007 (216) E.L.T. 177 In Paragraphs 10 and 12 of the judgment it has been held that the expression 'suppression' has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or 'collusion' and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. 11.7 When Revenue invokes extended period of limitation under Section 73 of the Finance Act, 1994, the burden is on it to prove suppression of fact. An incorrect statement cannot be equated with a willful mis-statement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct. As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conduct of the Appellant. Interest as per law on service tax demand shall follow. 14. In the result, Appeal is partly allowed and remanded to the learned adjudicating Authority to recompute the tax liability as well as interest for the normal period granting cum-tax benefit and Cenvat credit in accordance with law. ST/828/2010 15. This case was not argued by both sides. Hence not disposed by above order. Registry is required to list the matter for hearing if stay order dated 12.10.2010 is complied by the Appellant by the date stipulated by the order. (Pronounced in the Open Court on / /2011) (Mathew John) (D.N.Panda) Technical Member Judicial Member 15. I have gone through the views recorded by my Ld. Brother. The basic issue at hand is what constitutes export of services, in particular with reference to Business Auxiliary Service taxable under Section 65(105)(zzb) of Finance Act, 1994 and Maintenance and Repair Service taxable under section 65 (105) (zzg) of the Finance Act, 1994. This matter in relation to Business Auxiliary Service has come up before the same bench earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. This is an issue which has come up before the Tribunal in a few other cases in the past. This issue is of a recurring nature. So it is extremely necessary to achieve a harmonious, predictable, easily understandable legal position on this issue which should preferably be available to the public in condensed legal Act or Rules. It will be desirable to avoid a situation where the public has to read too many decisions of the courts and clarifications issued by CBEC for understanding the matter. So I would like to first examine this issue with reference to Export of Service Rules, 2005 and find whether the issue can be answered based on these Rules. Here also there is the complication that these Rules itself were changed on few occasions during the relevant period. 19. It is seen that the officers of the department and the public get confused about these Rules quite often and giving an outline of the concept of the Rules will help in easy understanding of the Rules. As per these Rules the taxable services have been grouped into three categories by specifically mentioning the clauses of section 65 (105) of the Finance Act, 1994 under which e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be read as an interpretation the Rules. 20. Maintenance and Repair service is Category-II service where export is decided with reference to place of performance. Business Auxiliary service is Category-III service where export is decided with reference to location of the service receiver. This is the reason why I come to different conclusions in respect of these two services. 21. The impugned Business Auxiliary Service is that of promotion of sales in India of products of Microsoft Operations PTE Ltd., a Singapore corporation. The activities for promotion and the sales consequent to the promotion take place substantially in India, though there is a marginal issue that there may be some activities relating to promotion of business in Bhutan, Nepal, Maladives and British Indian Ocean Territory apart from India. That marginal issue is not central to the dispute. Thus activity is subjected to tax under Section (105) (zzb) and this is covered by Category-III discussed above. On these facts and legal position there is no dispute. 22. The criteria applicable for deciding export of services of Category-III during the period 19-04-2006 to 28-02-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefiting from the products sold in India and the after sales services done in India are located in India. This is the argument that is reflected as the need to test location of the customer (see para 226 of the impugned order). I am of the view that the service that is sought to be taxed is the service provided to the person paying for the service and not the service which is provided to a person in India who is not paying for the service though such person may also be a beneficiary of such service. Though the concept that taxable service and consideration paid for it flow in opposite directions is an important concept I think that there is no need to dwell at great length on this issue especially because this issue has been dealt with in the case of Appeal No.ST-311/2009 filed by M/s. Paul Merchants Ltd. which matter is not yet finally decided because of difference in opinion between the two members who original heard the case. I am of the view that the customer for the impugned service of sale promotion is Microsoft Singapore and not the person buying the software. That is to say I am of the view that the customer, with reference to whom issue is to be decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exported can be changed by a clever routing of service. I have already mentioned the possibility of medical reports of a hospital in India for use in India being maintained at the request of a company situated abroad and paid for by such company. If this arrangement is a farce with the special objective of avoiding service tax it is a matter to be challenged and if the law is found to be weak to prevent such leakage of revenue law itself found to be weak to prevent such leakage of revenue law itself should be amended. A fear of such a possibility cannot be a reason for interpreting the rule as is before me now. 28. The next issue is the effect of the expression used outside India which was in force till 27-02-2010. This is a more contentious issue. It is argued by the Appellants that the use of marketing efforts in India is for a sale of products developed outside India and since the service results in increased sale of such product the use is outside India. This is a debatable issue. A harmonious construction considering the evolution of these Rules as also the circulars issued by CBEC prior to 13-05-2011 like the Circular No.111/05/2009-ST dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia itself because Microsoft Corporation may have development centres in India (routing issue). There can also be a concern that the company in India providing service and the company in Singapore receiving services are inter-related companies (see para 4 CBEC circular dated 13-05-2011). There can be another concern that category-II services, performed in India, used as input services may also be getting the benefit of export because the output service gets classified as Category-III. These are not issues contested at any stage in these proceedings but only mentioned to illustrate how complicated things can become in the matter of deciding export of services. Obviously the matter before us cannot be decided on the basis of all what we do not know. 33. Now I wish to examine whether there is anything in Export of Services Rules, 2005, which is contrary to meaning of export for interpreting Article 286 (1) (b) of the Constitution and definition of the term in Customs Act, 1962 and the decisions for the Apex Court I the case of Association of Leasing and Financial Service Companies-2010 (20) STR 417 (SC) and All India Federation of tax Practitioners Vs. UOI 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. So it is clear that the Hon Court is talking about the destination based of the consumer of the service. So the actual issue in this case is to determine the consumer of the service. The consumer of the service is the person paying for the service and not any person who may also benefit from the activity. 36. In the matter of theory of equivalence decided by the Apex Court first in the case of All India Federation of Tax Practitioners (supra) and later referred to by the Court in the case of Association of Leasing and Financial Service Companies (supra) what I find is that the observation is made while answering the question whether Union of India has power to levy service tax on the services in question and the decision cannot be interpreted to mean that goods and services are exactly equivalent in all matters relating to taxation. Already there are a few differences in practices followed for levy of excise duty and levy of service tax as in the case of point of taxation, taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Article 2 and 3 of the Agreement dated 01/07/2005 was delivered outside India and used there at and is immune from levy of service tax as export of service in terms of the provisions of Export Service Rules, 2005 read with circulars issued by C B E & C excluding Circular No.141/10/2011 - TRU dated 13.05.2011? (iii) Whether the impugned Business Auxiliary Service provided in terms of Agreement dated 01/07/2005 is governed by the principles of equivalence and destination based consumption tax as well as law laid down by Apex Court in All India Federation of tax Practitioners Vs. UOI 2007 (7) STR 625 (SC) and Association of Leasing and Financial Service Companies-2010 (20) STR 417 (SC). (iv) The Appeal in Appeal No.ST-828/2010 without being argued by both sides whether can be said to have involved the issue that output service was exported or conclusion is to be arrived at upon hearing both sides? (v) Whether demand for the normal period sustains subject to grant of cum-tax benefit and CENVAT Credit? (Pronounced in the open Court on 9.11.2011) (Mathew John) (D.N.Panda) Technical Member Judicial Mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cenvat Credit? 40. Inasmuch as the facts already stand detailed in the said orders recorded by my brothers, the same are not being repeated so as to avoid redundancy. In fact I find that there is no dispute on the factual position and it is only the legal issue, on which there are separate opinions by both the sides. The main issue required to be decided is as to whether the appellant, who is subsidiary company and had entered in the market development agreement with foreign principal located at Singapore is liable to Service tax on the services so rendered by them to its principal company. 41. The matter was heard at length on different dates when the representative of both the sides appeared and made extensive arguments. Subsequent to the conclusion of the arguments, both the sides have placed on record the written submissions. 42. The appellants is admittedly covered under the definition of business auxiliary services. The said services are being provided by the appellant to its principal company, which is located at Singapore. The dispute required to be resolved is as to whether rendering of business auxiliary services to a service recipient, which is located out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'provided' is the equivalent of the word 'manufacturer' in the case of goods. It means 'creation' or 'origin'. Undoubtedly, the service has been provided in India. Thus the service was never provided outside India. For this additional reason also the services in this case do not constitute export within the meaning of Rule 3(1)(iii) of the Export of Services Rules 2005 for the period from 19/4/2006 to 31/5/2007. Further for the period 01/06/2007 onwards the criterion provided outside India was omitted but the condition of services provided from India and used outside shall remained in force. 45. The Rules clearly specify two separate conditions i.e. the user should be located outside India and the use should also be outside India. These conditions have to be satisfied independently of each other. If the Noticee's explanation were to be accepted, a mere change in location of the recipient will also lead to change in the place of use of service. For example, if in this case, the recipient were to be relocated from USA to say Japan, in terms of the noticee's logic, the place of use of service will stand automatically shifted from USA to Japan. This legal posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intangible as against the export of tangible goods and as such, definition of export as appearing in Customs Act being in respect of goods is irrelevant and the entire issue has to be adjudged in accordance with the provisions of Export Service Rules, 2005. Learned advocate appearing for the appellant has also drawn my attention to the other decisions, in support of his submissions. 48. Without going into the detailed facts involved and the detailed submissions made by both the sides, I find that an identical dispute was the subject matter of another decision of the Bench constituting the same Members, in the case of M/s. Paul Merchants Ltd. vs. CCE Chandigarh . The said difference of opinion referred to third Member stand resolved in favour of the assessee. It stand held by third Member that the services provided by a sub-agent in India to a service recipient located outside are export of services and hence not liable to be taxed. 49. Inasmuch as the same issue is involved in the present matter also, by adopting the said majority decision in the case of Paul Merchants Ltd. laying down that the services provided by the agents and some agencies being delivery of money to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the foreign telecommunication services provided to a person, roaming India were held to be constituting export services under the Export of Services Rules, 2005. The said decision stand subsequently followed by the Tribunal in the case of CESTAT, Mumbai vs. Bayer Material Science Pvt. Ltd. vs. CST Mumbai [2014 TIOL- 1064 CESTAT- Mum] Business Auxiliary services provided by the assessee to their members located outside India by marketing their product in India was held to be export of services inasmuch as the service was held to be provided to the foreign located person who was also paying to the assessee on such services in convertible foreign exchange. 53. Learned DR appearing for the appellant has not been able to brought to my notice any other decision of any other Court which is contrary to the law declared in the above referred decision. Accordingly, I agree with the learned Member (Technical) that the services provided by the appellant are covered by the Export of Service Rules 2005 and are not liable to service tax. 54. In view of the above, the difference of opinion on various points is resolved as under: (i) That the business auxiliary services of promotion of mark ..... X X X X Extracts X X X X X X X X Extracts X X X X
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