2012 (8) TMI 607 - AT - Service Tax

Tribunal rules against appellant on service tax issue, partial pre-deposit required with waiver granted for specific period.

LIFE CARE MEDICAL SYSTEMS Versus COMMISSIONER OF SERVICE TAX, MUMBAI-II

LIFE CARE MEDICAL SYSTEMS Versus COMMISSIONER OF SERVICE TAX, MUMBAI-II - 2013 (29) S.T.R. 129 (Tri. - Mumbai) Issues Involved:1. Classification of services under 'Business Auxiliary Services.'2. Determination of whether the services rendered qualify as 'export of service.'3. Applicability of service tax exemptions and Export of Service Rules.4. Invocation of the extended period for demand of service tax.5. Financial hardship and balance of convenience for granting stay.Detailed Analysis:1. Classification of Services under 'Business Auxiliary Services':The Tribunal noted that there is no dispute regarding the classification of the services provided by the appellant under 'Business Auxiliary Services' as per the provisions of Section 65(19) read with Section 65(105)(zzb) of the Finance Act, 1994.2. Determination of Whether Services Rendered Qualify as 'Export of Service':The primary issue was whether the services rendered by the appellant to the foreign service recipient qualify as 'export of service' during the periods from 01/07/2003 to 19/11/2003 and 18/03/2005 to 05/12/2007.- For the period 01/07/2003 to 19/11/2003: The Tribunal considered the Board's Circular No. 56/5/2003 dated 25/04/2003, which clarified that 'Service tax is a destination-based consumption tax and it is not applicable on export of services.' Accordingly, the appellant had a prima facie case for waiver of pre-deposit of dues adjudged for this period.- For the period from 15/03/2005 onwards: The Tribunal examined the Export of Service Rules, 2005, which stipulated that a service shall be treated as 'export of service' if it is delivered outside India and used in business outside India. The Tribunal found that the promotional and marketing activities undertaken by the appellant were conducted in India and used for promoting the business of the foreign manufacturer in India. Hence, these services did not qualify as 'export of service' as the effective use and enjoyment of the services were within India.3. Applicability of Service Tax Exemptions and Export of Service Rules:The Tribunal analyzed various notifications and rules governing service tax exemptions:- Notification No. 6/99-ST and Notification No. 21/2003-ST: These provided exemptions for services where payment was received in convertible foreign exchange. However, these notifications were rescinded, and the Export of Service Rules, 2005, came into effect.- Export of Service Rules, 2005: For the period under consideration, the rules required that the service be delivered and used outside India. The Tribunal concluded that the services rendered by the appellant did not meet these criteria as they were used within India.4. Invocation of the Extended Period for Demand of Service Tax:The appellant contended that the demand was barred by the limitation of time. However, the Tribunal found that the appellant failed to disclose the agreement with VIASYS and the receipt of consideration for services rendered. This constituted suppression of facts, justifying the invocation of the extended period for demand under Section 73 of the Finance Act, 1994.5. Financial Hardship and Balance of Convenience for Granting Stay:The Tribunal noted that the appellant did not provide evidence of financial hardship. The balance of convenience favored the revenue, and the Tribunal directed the appellant to make a pre-deposit of Rs. 25 lakhs within eight weeks. Upon compliance, the pre-deposit of the balance amount would be waived, and recovery stayed during the pendency of the appeal.Conclusion:The Tribunal concluded that the appellant's services did not qualify as 'export of service' for the periods from 18/03/2005 to 05/12/2007. The demand for service tax was upheld, and the appellant was directed to make a partial pre-deposit. The Tribunal granted a waiver for the period 01/07/2003 to 19/11/2003 based on the Board's circular, acknowledging the appellant's prima facie case for this period.