Tribunal upholds service tax on foreign marketing support, exempts commission for order procurement.

The Tribunal upheld the service tax liability on amounts paid to a distributor for marketing support services in foreign countries under Section 66A of the Finance Act, 1994. The Tribunal confirmed the tax liability, interest, and penalties. However, regarding the commission received for procuring orders for a German company, the Tribunal found the service tax liability unsustainable, citing precedents that mere order procurement for an overseas manufacturer is not taxable in India. The appeal was allowed on this point, ruling out the service tax liability on the commission received for order procurement.

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Issues:
1. Service tax liability on amounts paid to distributor for marketing support services in foreign countries.
2. Service tax liability on commission received for procuring orders for a German company.

Analysis:
Issue 1: The Tribunal upheld the service tax liability on amounts paid by the appellant to a distributor in foreign countries for marketing support services. The liability arose under Section 66A of the Finance Act, 1994, through the Reverse Charge mechanism. The Tribunal confirmed the tax liability, interest, and penalties, rejecting the appellant's appeal on this point.

Issue 2: Regarding the commission received for procuring orders for a German company, the Tribunal found that the service tax liability was unsustainable. The lower authorities had based their decision on Rule 3(2) of the Export of Services Rules, 2005, claiming that the services were provided in India but used outside India. However, the Tribunal referred to the precedent set by the majority decision in Microsoft Corporation (I) P. Ltd. 2014 (36) STR 766, which held that mere procurement of orders on behalf of an overseas manufacturer is not taxable in India. This view was supported by other decisions, including ATE Enterprises Pvt. Ltd. 2015 (39) STR 81. Therefore, the Tribunal allowed the appeal on this point, stating that the service tax liability on the commission received for order procurement was unsustainable.

In conclusion, the Tribunal partly allowed and partly rejected the appeal, upholding the service tax liability on amounts paid to the distributor for marketing support services in foreign countries but ruling out the liability on the commission received for procuring orders for the German company.

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