Waiver of Service Tax Pre-Deposit Granted for Exported Business Services

The Tribunal granted a waiver of pre-deposit of service tax and penalty under Section 78 of the Finance Act, 1994, amounting to Rs. 8,22,393/- for the period 1-4-2005 to 30-11-2006. The applicant's services promoting products manufactured by a foreign company were classified as falling under the export of service category. The Tribunal ruled that the services provided were considered export of service under the Export of Services Rule, 2005, as they were business auxiliary services provided to recipients located outside India. The waiver of pre-deposit was granted, and recovery was stayed pending appeal.

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Issues:
Waiver of pre-deposit of service tax and penalty under Section 78 of Finance Act, 1994 for the period 1-4-2005 to 30-11-2006 based on the contention that the services provided fall under the category of export of service.

Analysis:
The applicant sought a waiver of pre-deposit of service tax and penalty under Section 78 of the Finance Act, 1994, amounting to Rs. 8,22,393/-, for the period 1-4-2005 to 30-11-2006. The applicant contended that their services, related to promoting products manufactured by M/s. Alcatel Sel AG, Germany, fall under the export of service category. They argued that as per Board Circular No. 111/5/2009-S.T., their activities are rightly classified as falling under export of service, thus exempting them from paying service tax. The Tribunal's decision in the case of Mapal India Pvt. Ltd. v. Commr. of Central Excise, Bangalore was cited in support of their contention. The applicant received commission in foreign exchange for promoting the products of the foreign company, Alcatel Sel AG, Germany.

Undisputedly, the period in question falls after the issuance of the export service rule. The applicant's services were categorized under category (III) of services that are considered export of service under the Export of Services Rule, 2005. Category III services include business auxiliary services, among others, provided to recipients located outside India. The Board clarified that for Category III services, export of service can occur even if all activities take place in India as long as the benefits accrue outside India. The Tribunal's decision in the case of Mapal India further supported the applicant's argument by emphasizing that services provided to a recipient located outside India are considered exported services.

The Tribunal found that the applicants were indeed promoting the business of Alcatel, Germany, and receiving commission in foreign exchange, thus making a prima facie case for a total waiver of pre-deposit of service tax and other dues. Consequently, the requirement of pre-deposit of dues was waived, and recovery thereof was stayed during the pendency of the appeal. The order was pronounced in the open court, granting the relief sought by the applicant.

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