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TMI Blog2009 (10) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld - petition dismissed. - 11460/2009 & CM No. 11182/2009 - - - Dated:- 30-10-2009 - A. K. SIKRI and SIDDHARTH MRIDUL, JJ. Mr. M. Venkatraman, Sr. Adv. with Mr. Achin Goel, Advocate, for the appellant. Mr. Biswajit Bhattacharya, Sr.Adv. with Mr. Mukesh Anand, Mr. Shailesh Tiwari and Mr. Sumit Kumar, Advocates, for the respondent. [Judgment per A.K. SikrI, J.]. - The petitioner herein, namely, Microsoft Corporation (India) Private Ltd., entered into market development agreement dated 1.7.2005 with Microsoft Operations, Singapore (hereinafter referred to as the 'MS'). Both the MS and the petitioner are the wholly owned subsidiaries of Microsoft Corporation, Washington (hereinafter referred to as the 'Holding Company'). As per the agreement dated 1.7.2005, the petitioner was appointed to provide various technical support services, including marketing of Microsoft products in Bhutan, India, Maldives, Nepal and British Indian Ocean territory. For the services provided by the petitioner to the MS under the aforesaid agreement, the petitioner is receiving commission. The respondent herein has taken the view that the commission received on these servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill 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 agreements with customers regarding Microsoft Products, but shall instead promptly submit written customer orders to MO or its affiliates, as appropriate, for its acceptance or rejection. 3.2.2 Subsidiary shall assist MO as requested in collection past due accounts and performing other activities reasonably related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 MSFT or any MSFT affiliate. Taxes, insurance, duties, freight and other charges not attributable to the Microsoft Product itself paid by the customer shall not be considered in calculating the amount of commission. The commission payments shall be exclusive of any applicable consumption tax such as a Goods and Services Tax or a Value Added Tax which consumption tax shall be the responsibility of MO. 6.3 RGE Services. For RGE Services rendered pursuant to Article 4, MO shall pay subsidiary an amount equal to one h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner holding that there was no export of services for which the petitioner was liable to pay tax under the Finance Act, 1994, under the category of business auxiliary services providing during the year in question. The Tribunal, thereafter, recorded the submissions of the counsel for the petitioner, on the basis of which order of the adjudicating authority is challenged and dealt with the same, taking prima facie view of the matter. 6. Perusal of the order would also indicate that the Tribunal has heavily relied upon the judgment of the Supreme Court in All India Federation of Tax Practitioners Ors. v. Union of India Ors., 2007 (7) STR 625, wherein it has been held that services fall in two categories, namely, property based services and performance based services and the service performed in India would be covered by the service tax under the Finance Act, 1994. As per the prima facie view taken by the Tribunal, place of performance of service is decisive for determining event of taxability as well as incidence of tax. 7. We may also, at this stage, point out that the Supreme Court in the aforesaid case had specified two categories of the services in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide India, it shall be treated as performed outside India: Provided further that where the taxable services referred to in sub-clauses (zzg), (zzh) and (zzi) of clause (105) of section 65 of the Act, are provided in relation to any goods or material or any immovable property, as the case may be, situated outside India at the time of provision of service, through internet or an electronic network including a computer network or any other means, then such taxable service, whether or not performed outside India, shall be treated as the taxable service performed outside India; (iii) Specified in clause (105) of section 65 of the Act, but excluding - (a) sub-clauses (zzzo) and (zzzv); (b) those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and (c) those specified in clause (ii) of this rule, when provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service: P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner was not liable to pay the service tax. Learned senior counsel also referred to Circular dated 24.2.2009 as per which the applicability of the aforesaid clause was amply clarified in favour of the persons like the petitioner in the instant case. (b) In all similar appeals which were pending before the different Benches of the Tribunal, the Tribunal had been granted unconditional stay by completely waiving the requirement of pre-deposit. He referred to the following orders passed in this connection :- (i) M/s. GAP International Sourcing ( India ) Pvt. Ltd. v. Commissioner of Service, Delhi - 5. We have carefully considered the submissions from both sides. We are conscious that we are dealing with export of services which are intangible unlike export of goods. A reading of the agreement shows that the decision relating to the choice of various fabrics, vendor, service providers are to be taken by the parent company which are based outside India. Admittedly, they do not have any office in India. The applicant has undertaken several activities in India but the feed-back or the reports appear to have been submitted by them to the parent company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 (11) STR 23 (iii) Lenovo ( India ) Pvt. Ltd. v. CCE (Appeals-II) Ors. 2009 - TIOL - 911 - CESTAT - DEL. On that basis, the submission was that the Tribunal could not have ignored the aforesaid orders passed finally or by way of interim measure while deciding the stay application of the petitioner. According to him, as per the well-settled practice and principle of law laid down by the Supreme Court and the High Courts, the petitioner should have been meted out the same treatment by granting similar stay. In this behalf, he drew our attention to the following observations of the Bombay High Court in Wardha Coal Transport Pvt. Ltd. v. Union of India Ors., 2009-TIOL-79, where it was observed as under :- 8. It is not possible for us to agree with Mr. Desai. It is pertinent to note that in similar fact situation in SSV Coal Carriers Pvt. Ltd., the Tribunal has granted the prayer for waiver of pre-deposit. Similarly, in Kartikay Bulk Movers Pvt. Ltd. v. Commissioner of Central Excise, Nagpur delivered on 7-10-2008, where also the facts were somewhat similar, waiver of pre-deposit has been granted. Moreover, the Tribunal in Sainik Mining Allied Services Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear was in relation to the peculiar facts of that case and may not be applicable to the case in hand. We are not inclined to delve into that question, since we are not inclined to express any opinion on the merit of the contentions made by the parties as the appeal is pending before the appellate authority. But having considered the facts and circumstances of the case we direct that the assessee may not be called upon to deposit any amount till the appeal of the assessee is disposed of by the appellate authority. The impugned order of the High Court and the appellate authority refusing the prayer for not depositing the amount are set aside. The appellate authority is directed to take up the appeal on merits without insisting upon any deposit to be made by the assessee. The appeal may be heard expeditiously. 3. The appeal is disposed of accordingly. (c) His next submission was that the learned Tribunal also did not correctly appreciate the principles on which applications for stay are to be considered. According to him, when the petitioner had made out a strong prima facie case in its favour and the Tribunal had in other cases taken the view that no pre-deposit is required, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine manner unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens' faith in the impartiality of public administration, interim relief can be given. This view was reiterated by the Supreme Court in Benara Valves Ltd. v. CCE, 2006 (204) ELT 513. 9. Mr. Bhattacharya, learned senior counsel appearing on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these circumstances, it becomes clear that prima facie case does not exist. According to him, the Tribunal had been indulgent to the petitioner by granting stay in liberal terms. (iv) Adverting to the Rules, he argued that even as per Rule 3(2) of the Rules, in order to claim export, service ought to be used outside India. These words have remained in this Rule intact, even after a series of amendments to the said rule. Therefore, these Rules which have been framed by the Central Government under Section 93 and 94 of the Finance Act, 1994 and notified in the official gazette have to be read as it is. (v) Countering the argument based on clarificatory circular, he submitted that the following judgments of the Supreme Court amply demonstrate that the Courts/Tribunals are not bound by that Circular:- (i) CCE v. Dhiren Chemical Industries, (2002) 2 SCC 127 (ii) Kalyani Packaging Industry v. UOI, (2004) 6 SCC 719 (iii) CCE, Bolpur v. Ratan Melting, 2008 1) ELT 22 (SC) He, thus, pleaded that any interpretation of Rule 3(2) as aforesaid given by the CBEC vide Circular dated 24.2.2009 shall not be binding on Tribunals/Courts. In any event, having regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the prima facie view of the matter. We find from the impugned order passed by the Tribunal that it has discussed this aspect in much detail though at this stage only prima facie view is taken, which it was supposed to. The Tribunal has extensively quoted from the judgment of the Supreme Court in All India Federation of Tax Practitioners (supra). As of today, the action of the adjudicating authority is predicated on the said judgment. Whether case of the petitioner falls in third category of Rule 3 of the Rules is yet to be finally determined. The Tribunal was not oblivious to these Rules either, as reference thereto finds place in the impugned order. It would be of use to incorporate the following discussion contained in the order of the Tribunal, analyzing the terms of agreement between the petitioner and MS :- 24. It also appears that the services provided by the appellant were only to benefit the consumers of Indian Territory and that was provided for and on behalf of the holding company in USA as well as the subsidiary in Singapore. The end user of service being located in India and need of such consumers being met by the appellant for and on behalf of its foreign prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service provided to the consumers thereat to fulfil contractual obligation of the foreign holding company as well as subsidiary company of Singapore. The benefit of service terminated in India only, without travelling abroad. The performance based service provided in India in terms of the sample agreement dated 01.07.2005 appears to have resulted with provision of service to the consumers in India. Therefore it appears that even the circular does not explain the position of law as claimed by the appellant to its advantage. 26. The circulars hold that location of service receiver is relevant factor to decide export of service under Rule 3(1)(iii) of Export of Services Rules, 2005. This does not rule out that when ultimate outcome of service is consumed in India, the service exhausts or extinct thereat without being capable of exported, losing its utility. Performance of service being decisive for taxation and to decide taxable event and incidence of tax, export of service pleaded by the appellant is inconceivable. 27. It may be stated that business auxiliary service provided by a service provider in terms of Section 65(105)(zzb) of Finance Act, 1994 is taxable for the rational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. 2009 TIOL BANG, wherein it was held that the said case was similar to case of ABC (India) Ltd and Blue Star (supra). But these decisions, prima facie, do not come to rescue of the appellant for the law laid down by Apex Court in All India Fedn. Of Tax Practitioners - 2007 (7) STR 625 (SC). 29. Appellant also relied on the decision of Ahmedabad Bench in 2009 TIOL 602 CESTAT AHMD. A copy of the said decision was submitted subsequent to hearing. That decision related to interim order passed by the Ahmedabad Bench. However, while passing order, Bench had taken note of the decision in Blue Star and ABC (India) Ltd. In addition to these citations, the appellant also relied on decision of Delhi Bench in case of Gap International Sourcing (India) Pvt. Ltd . 2009 TIOL 249 CESTAT DEL. Appellant's submission was that absolute stay was granted in identical issue of existence of recipients of services outside India shall enjoy export service benefit. Therefore, appellant's contention in present case is that when services recipients were outside India, appellant is entitled to similar benefit. These orders are already reproduced above, which are short orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amalendu Das and Ors . (AIR 1984 SC 653), M/s. Samarias Trading Co. Pvt. Ltd. v. S. Samuel and Ors. (AIR 1985 SC 61) and Assistant Collector of Central Excise v. Dunlop India Ltd . (AIR 1985 SC 330). While arriving at the above conclusion, we were conscious of decision of Apex Court in Ravi Jain 's case - 2009 (237) ELT 3 (SC). The Hon'ble Supreme Court in para 10 of the judgment held as under :- 10. It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay-should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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