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TMI Blog2025 (1) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... d outside India. The Tribunal has further held that when the person on whose instructions the services in question have been provided is located abroad, the destination of the service has to be treated abroad. The destination has to be decided on the basis of the place of consumption and not the place of performance. The place of provision of such services is outside the taxable territory and thus, these are not taxable for the period from July, 2012. In the instant case, considering the nature of services, it is found that the place of provision has to be determined under the general rule, i.e. Rule 3. Under Rule 3 of the POPS Rules, the place of provision of service will be Canada, i.e. location of Canpotex. As the place of provision of these services is outside the taxable territory, the same are not chargeable to Service Tax under Section 66B. In the impugned order the place of provision has been determined under Rule 4(b) of the POPS rules. It is evident from the agreement as well as the impugned order that service was not provided to an individual thus, such rule is not applicable. Further, no recipient of service was acting on behalf of the recipient in India as there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n filed by the Appellant assailing the Order-in-Original No.03/COMMISSIONER/ST/NOIDA/2017-18 dated 29.04.2017 passed by Commissioner of Service Tax, Noida. 2. The facts of the case in brief are that the Appellant is engaged in manufacture and sale of fertilizers, chemicals, soda ash and other consumer products. One of the products sold by the Appellant is Murate of Potash MOP . M/s Canpotex Limited Canpotex , Canada is engaged in manufacture and sale of MOP. The Appellant also buys MOP from Canpotex and sells the same in India. On 01.09.2011 Canpotex entered into an agreement in the following terms with the Appellant to give USD 8,00,000/- per month to the Appellant in order to develop Potash market in India in a sustainable manner and to improve the application capabilities of the farmers. The deficiency of potash in the soil in various regions of lndia requires a directed effort to be rectified. In order to develop the potash market in a sustainable manner, Special fund would need to be employed to ensure proper distribution and also to cover the cost of improving the application capabilities of the farmers. To enable the above, Canpotex agrees to support Tata Chemicals Ltd TCL . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till 30.06.2012, the SCN and the impugned order classify the services under Service of Promotion of Brand of Goods/Services . The same service which was classified earlier under BSS without any change in the definition of BSS or in the facts subsequently classified under another classification. This also depicts the non-application of mind and uncertainty in the mind of the Adjudicating Authority. For such reason also the demand is not sustainable. 4. Learned Departmental Authorized Representative appearing for the Revenue justified the impugned order. 5. Heard both the sides and perused the appeal records. 6. We find that the impugned order has confirmed demand of Service Tax by observing that the activities carried out by the Appellant are in nature of BSS and BPS. In this regard it is submitted that the services rendered by the Appellant to Canpotex are in nature of BAS and not BSS and BPS. In any case as submitted above, the classification of the service under BSS till 22.06.2010 has no relevance as the period of demand is from April, 2011. The definition of service of promotion of brand of goods/services is as under:- Taxable service means any service provided or to be provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of BAS. 8. In view of the above, it is observed that the Appellant is providing BAS to Canpotex, and such services cannot be classified under the categories of BSS/ BPS. In such a case, the very basis of confirmation of demand in the Impugned Order loses its validity and the same deserves to be set aside. In any case, as the activities of the Appellant cannot be classified wider BSS/BPS, confirmation of demand under such categories for the period 2011-12 is illegal and deserves to be set aside. Further reliance is places on the following decisions wherein it was held that if the demand raised in the SCN is based on the incorrect classification then the same is not legally sustainable:- Larsen Toubro Ltd. v. CCE Mundra Gujarat Insecticide Ltd. v. CCE ST Surat-II, 2023 TIOL 190 CESTAT AHM 9. The service recipient of such services is Canpotex located outside India and therefore, the activities carried out by the appellant qualify as export of service. The impugned order has confirmed the demand of service tax against the Appellant on the ground that the activities carried out by the Appellant do not qualify as export of services as these services are used in India in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rendered by the Appellant. Though as a result of carrying out such activities, the Indian farmers may get benefitted, it does not confer them the status of service recipient. It is submitted further that from the agreement itself, it is evident that the payment was based on the premises that the Appellant will buy sufficient quantity of goods. Further, the agreement termed such payment as Market Development and Support Charges establishing the intention and purpose of the parties to the agreement. The market development would have certainly benefited the exporter and he is the direct beneficiary of the service as his production and export increases by such activity of the Appellant. In light of the above submissions, it is submitted that no service tax is payable on the activities of the Appellant and the same is true for the period both prior to and after introduction of negative list of services. 11. For the period till June, 2012 the export of service is governed by the provisions of the Export of Service Rules, 2005 EOS Rules . For the period from July, 2012, the place of provision of a service is to be determined under the Place of Provision of Service Rules, 2012 POPS Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is obliged to make payment for the service and whose need is satisfied by the provision of the service, is the recipient of service. On this ground, the Tribunal held that where the person located abroad is under an obligation to pay for the service and thus pays for it, the service is used outside India. The Tribunal has further held that when the person on whose instructions the services in question have been provided is located abroad, the destination of the service has to be treated abroad. The destination has to be decided on the basis of the place of consumption and not the place of performance. The place of provision of such services is outside the taxable territory and thus, these are not taxable for the period from July, 2012. For the period from July 2012, it is submitted that the place of provision of these services is outside the taxable territory as defined under Section 65B(35) of the Act and thus, no charge of Service Tax is attracted thereon under Section 66B of the Act. The general rule for determining the place of provision is contained in Rule 3 of the POPS Rules. According to Rule 3, the place of provision of a service shall be the location of the recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, the Appellant, is located in the taxable territory b) The recipient of service Canpotex is located outside India c) The services of market development rendered by the Appellant is not covered under negative list of services d) The place of provision of these services, as discussed hereinabove, is outside the taxable territory and, e) The Appellant has received payment for such services in USD, i.e. convertible foreign exchange. f) Lastly, the Appellant and Canpotex are not merely establishments of distinct persons as provided in Explanation-2(b) to Section 65B(44) of the Act. Thus, all conditions of Rule 6A are fulfilled in the present case and the services rendered by the Appellant qualify as export of services. Further reliance is placed on the following decisions wherein it was held that where the agreement to provide services is between the Indian service provider and a foreign company, then the service recipient would be the foreign company and not the domestic beneficiary of the service and such service would be export of service:- Medway Educational Consultant Pvt. Ltd. vs. Commissioner, CGST Commissionerate, Delhi-West, 2024-VIL-412-CESTAT-DEL-ST. Study Overseas Global ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moval of the goods. Such Trade Discounts shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price. [Emphasis supplied] 18. On a perusal of the observations of the Hon'ble Supreme Court, it is clear that irrespective of the nomenclature used to describe discounts, so far as the discounts are established under the agreement or under terms of sale or by established practice and the nature of the discounts is known at or prior to the removal of the goods, they shall be admissible as deduction for arriving at the transaction value. Further, the Court has categorically held that the discounts shall be allowed even if they are not payable at the time of each invoice. 19. In view of the above, it is our considered view that the said discount, being towards sale of goods, is not covered under any of the categories of services under Section 65(105) and not chargeable to Service Tax under Section 66 of the Act for the period till June, 2012. Similarly, such discount, being towards sale of goods, is excluded from the definition of 'service' under Section 65B(44) of the Act and thus not chargeable to Service Tax under S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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