Export-linked services to a 100% EOU were treated as export of services, defeating service tax liability.

Services rendered to a 100% export-oriented undertaking for use in providing services to overseas customers were treated as falling within export of services, because the record showed the output was ultimately consumed in the export stream. A Board circular and prior judicial pronouncements were relied on to support the position that such export-linked services are not liable to service tax. On that basis, the discussion concluded that the service tax demand could not survive and that exemption under Notification No. 21/2003-ST was available.

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Issues: Whether the services rendered to a 100% export oriented undertaking and used in the course of export of services were liable to service tax, and whether the exemption under Notification No. 21/2003-ST dated 20-11-2003 was available.

Analysis: The appellant produced the work order and related material showing that the services were rendered for development work to be used by the recipient in providing services to overseas customers. The recipient was a 100% EOU, and the record did not dispute that the services supplied by the appellant were ultimately consumed in the export stream. The Board circular relied upon by the appellant supported the position that services used as part of exported output are not liable to service tax. The issue was also treated as settled by prior judicial pronouncements on export of services.

Conclusion: The services were held to be covered by export of services and the demand of service tax could not survive; the assessee succeeded.

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