Export of commission-based business auxiliary services to a foreign principal can be tax free and refundable.

Commission-based business auxiliary services performed for a foreign principal, with consideration received in convertible foreign exchange, were treated as exempt or exported rather than taxable in India. The text relies on Notification No. 6/1999-S.T., the CBEC clarification that export of services remained tax free after rescission of that notification, Notification No. 13/2003-S.T. defining a commission agent, and Rule 3(1) of the Export of Services Rules, 2005 for services supplied to a recipient outside India. On that basis, service tax was not payable and tax already paid was refundable.

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Issues: Whether the services of promoting sales of a foreign principal and booking orders, for consideration received in convertible foreign exchange, were taxable in India or constituted exempt/exported services, and whether refund of service tax paid on such services was admissible.

Analysis: The appellant acted as a commission agent for the foreign principal and received consideration in convertible foreign exchange. Notification No. 6/1999-S.T. granted exemption where consideration was received in foreign exchange, and the CBEC clarified that export of services continued to remain tax free even after that notification was rescinded. Notification No. 13/2003-S.T. defined a commission agent as one who causes sale or purchase of goods on behalf of another for consideration linked to the quantum of sale or purchase. For the later period, the recipient of service was located outside India, and under Rule 3(1) of the Export of Services Rules, 2005, services of this nature were treated as exported. The cited departmental circular also supported that business auxiliary services provided to a recipient outside India amounted to export of services.

Conclusion: The services were not liable to service tax and the refund claims were admissible.

Final Conclusion: The impugned appellate order was unsustainable and the assessee succeeded in obtaining refund relief.

Ratio Decidendi: Where commission-based business auxiliary services are rendered for a foreign principal, the consideration is received in convertible foreign exchange, and the recipient is located outside India, the services are to be treated as exempt or exported and service tax already paid is refundable.

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