Tribunal Grants Appeal, Confirms Export of Services

The Tribunal allowed the appeal filed by M/s. Yamazaki Mazak India Pvt Ltd, confirming that the services provided by the appellant qualified as export of service. Consequently, the demand of service tax and imposition of penalties under Section 77 and 78 of the Finance Act, 1994 were set aside. The Tribunal's decision was pronounced on 12.7.17.

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Issues Involved:
1. Confirmation of demand of service tax.
2. Imposition of penalty under Section 77 and 78 of Finance Act, 1994.
3. Qualification of services as export of service.
4. Applicability of extended period of limitation.

Issue-wise Detailed Analysis:

1. Confirmation of Demand of Service Tax:
The appeal was filed by M/s. Yamazaki Mazak India Pvt Ltd against the confirmation of demand of service tax. The appellant argued that they were engaged in the promotion and marketing of spares and accessories for Yamazaki Mazak Trading Corporation, Japan (YMTCJ) and Yamazaki Mazak Singapore Pte. Ltd (YMSPL). They contended that these services qualify as export of service, relying on Circular No.111/5/2009 dated 24-2-2009 and Circular No.141/10/2011-TRU dated 13-5-2011. The appellant cited previous Tribunal decisions, including Bobst India Pvt Ltd and Microsoft Corporation (I) (P) Ltd, to support their claim that no tax can be demanded on these services.

2. Imposition of Penalty under Section 77 and 78 of Finance Act, 1994:
The appellant also contested the imposition of penalties under Section 77 and 78 of the Finance Act, 1994, arguing that they had a bona fide belief that their services were export services, as supported by the CBEC Circular dated 24-2-2009. They referenced decisions in National Engineering Industries Ltd Vs. CCE, Jaipur and Pam Pharma & Allied Machinery Co. P. Ltd Vs. CST, Mumbai to argue against the invocation of the extended period of limitation.

3. Qualification of Services as Export of Service:
The Tribunal examined the agreements between the appellant and YMTCJ and YMSPL, noting that the appellant was involved in various activities in India on behalf of foreign principals for a consideration. The Tribunal referred to the CBEC Circular dated 24-2-2009, which clarified that services provided by Indian agents for marketing goods of a foreign seller and receiving commission in convertible foreign exchange qualify as export of service. The Tribunal also considered Circular No.141/10/2011-TRU dated 13-5-2011, which elaborated on the meaning of 'accrual of benefit' and 'use outside India.' The Tribunal concluded that the services provided by the appellant qualify as export of service, as the benefit of these services accrues outside India.

4. Applicability of Extended Period of Limitation:
The Tribunal noted that the impugned order relied on the circular dated 13-5-2011 to interpret the phrase "use outside India." However, the circular dated 24-2-2009 clearly held that services provided by Indian agents for marketing goods of a foreign seller and receiving commission in convertible foreign exchange qualify as export of service. The Tribunal concluded that the appellant's claim of bona fide belief based on the circular dated 24-2-2009 was valid, and therefore, the extended period of limitation could not be invoked.

Conclusion:
The Tribunal, relying on previous decisions and the relevant circulars, held that the services provided by the appellant qualify as export of service. Consequently, the appeal was allowed, and the demand of service tax and imposition of penalties were set aside. The Tribunal pronounced the judgment in court on 12.7.17.

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