Export of service principle excludes commission for overseas order procurement from Business Auxiliary Service tax in India

Commission earned for procuring orders for overseas manufacturers was treated as export of service, not taxable Business Auxiliary Service in India. The activity was limited to sourcing Indian customers and forwarding orders to foreign principals, with supplies executed directly by the overseas manufacturers and consideration paid by them. As the service was rendered for the benefit of and consumed by the foreign recipient, the destination-based character of service tax excluded Indian levy. The service tax demand, along with interest and penalties, was set aside.

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Issues: Whether commission received for procuring orders for overseas manufacturers was liable to service tax as Business Auxiliary Services in India or constituted export of services.

Analysis: The activity undertaken was confined to procuring orders from Indian customers and passing them to overseas manufacturers, who executed the supplies directly. The consideration was paid by the foreign principals, and the service rendered by the appellant was for the benefit of the overseas manufacturers. Applying the settled view that service tax is a destination based consumption levy, services consumed abroad and used by a foreign recipient are not taxable in India. The earlier decisions relied upon on similar facts supported the conclusion that such order procurement activity amounts to export of service and does not fall within taxable Business Auxiliary Services.

Conclusion: The commission earned for procuring orders for overseas manufacturers was not liable to service tax in India and the demand was unsustainable.

Final Conclusion: The impugned order confirming service tax, interest, and penalties was set aside and the appeal succeeded.

Ratio Decidendi: Services rendered in India for and consumed by a foreign recipient, where the benefit accrues to the overseas principal, are to be treated as export of services and are not taxable as Business Auxiliary Services in India.

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