Tribunal rules in favor of appellant in service tax dispute under Business Auxiliary Service

The Tribunal confirmed the service tax liability of approximately Rs. 1.80 crores against the assessee under Business Auxiliary Service. The issue revolved around whether the services provided could be considered as export of services under the Export of Service Rules, 2005. Despite receiving a portion of the commission in Indian rupee, the Tribunal held that the services qualified as export of services, citing precedent decisions. The Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief.

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Issues:
Confirmation of service tax liability under Business Auxiliary Service, applicability of Export of Service Rules, consideration of commission received in Indian rupee for determining export of services.

Analysis:
1. Confirmation of Service Tax Liability: The judgment addresses the confirmation of service tax liability amounting to approximately Rs. 1.80 crores against the assessee under the category of Business Auxiliary Service. The Revenue contended that the services provided by the appellant to foreign companies for promoting their products in India did not qualify as export of services, leading to the demand for service tax for the period October 2004 to September 2011.

2. Applicability of Export of Service Rules: The main issue revolved around whether the services provided by the appellant could be considered as export of services under the Export of Service Rules, 2005. The appellant argued that since they were receiving commission from foreign companies in convertible foreign exchange, the services should be treated as export of services. However, the Revenue disagreed, stating that as the services were obtained and utilized in India, they did not qualify for the export status.

3. Consideration of Commission in Indian Rupee: A crucial aspect of the case was the consideration of the commission received by the appellant in Indian rupee for determining the export of services. While the appellant received a major portion of the commission in foreign exchange, around 5% was directly paid by Indian buyers in Indian rupee with the consent of the foreign company. The question arose whether this partial payment in Indian rupee satisfied the condition of consideration to be received in foreign exchange as per the Export of Service Rules.

4. Precedent Decisions and Legal Interpretations: The judgment extensively referred to various precedent decisions to support its analysis. It cited cases such as Microsoft Corporation (I) (P) Ltd. vs. Commissioner of Service, Gap International Sourcing (India) Pvt. Ltd. vs. Commissioner of Service Tax, and Paul Merchants Ltd. vs. CCE, Chandigarh, among others. These decisions established that commission paid in foreign exchange, even if indirectly routed through Indian buyers, could still qualify as consideration received in foreign exchange for export of services.

5. Judicial Interpretation and Conclusion: The Tribunal analyzed the issue in light of previous decisions and legal interpretations. It referenced the case of National Engineering Industries Ltd. vs. CCE, Jaipur, where the Tribunal held that commission received from foreign suppliers for procuring orders from Indian buyers constituted export of services. The judgment also cited the decision of the Hon'ble Madras High Court in a similar case, affirming that arrangements involving commission paid in Indian rupee could still be considered as receiving consideration in convertible foreign exchange. Based on these interpretations and precedents, the Tribunal found in favor of the appellant, setting aside the impugned order and allowing the appeal with consequential relief.

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