Tribunal rules in favor of taxpayer on service tax issues

The Tribunal set aside the service tax demand and related penalties on commission received under Business Auxiliary Service, as it qualified as an export of service. The matter of service tax on commercial training and coaching received in Japan was remanded for re-examination. The demand for manpower recruitment service was dropped, concluding that no such service was provided. The demand for consultancy services was upheld but penalty dropped due to revenue neutrality. The demand for technical consultancy fee was not considered. The appeal was disposed of accordingly on 14.12.2017.

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Issues Involved:
1. Service tax liability on commission received under Business Auxiliary Service (BAS).
2. Service tax on commercial training and coaching received in Japan.
3. Manpower recruitment or supply service provided by M/s.DIL to the appellant.
4. Service tax under consultancy service for payments made to DIL.
5. Technical consultancy fee paid to DIL, Japan, under reverse charge mechanism.

Issue-wise Detailed Analysis:

I. Service Tax on Commission under BAS:
The appellant received commission from M/s.DIL for product marketing and order procurement. The adjudicating authority confirmed the demand of Rs. 3,66,46,339/-. The appellant argued that the services qualified as export under the Export of Service Rules, 2005, citing several judicial precedents, including Paul Merchants Ltd vs. CCE and Microsoft Corporation (I) Pvt. Ltd. vs. CST, New Delhi. The Tribunal concluded that the services provided by the appellant qualify as export of service, setting aside the demand and related penalties.

II. Service Tax on Commercial Training and Coaching:
The appellant's employees received training in Japan, and the adjudicating authority confirmed a demand of Rs. 9,11,856/-. The appellant contended that since the training was conducted outside India, it should not attract service tax under the reverse charge mechanism, referencing CCE vs. Maersk India Pvt. Ltd. The Tribunal noted that the appellant had not contested this issue before the adjudicating authority and had already paid the service tax. The matter was remanded to the adjudicating authority for re-examination and fresh adjudication.

III. Manpower Recruitment or Supply Service:
The adjudicating authority confirmed a demand for the year 2006-07 but dropped the demand for 2005-06. The appellant argued that M/s.DIL, Japan, was not a commercial concern engaged in manpower recruitment or supply service. Foreign nationals working with the appellant were on its payroll, and their salaries were partly paid in India and partly in Japan. The Tribunal referenced judgments such as CST vs. Arvind Mills Ltd. and Volkswagen India Pvt. Ltd. vs. CCE, concluding that the appellant did not receive manpower recruitment or supply service from M/s.DIL. The demand and related penalties were set aside.

IV. Service Tax under Consultancy Service:
The adjudicating authority confirmed a demand of Rs. 12,19,421/- for consultancy services provided by DIL during 2007-08. The appellant argued that the situation was revenue neutral since the service tax paid was available as credit. The Tribunal agreed, upholding the demand but dropping the penalty, citing Jain Irrigation Systems Ltd. vs. CCE.

V. Technical Consultancy Fee under Reverse Charge Mechanism:
The adjudicating authority dropped the demand for the period 2004-05 and 2005-06. As the demand was not contested in the appeal, it was not under consideration.

Conclusion:
(i) The demands for issues I and III were set aside, along with related interest and penalties.
(ii) Issue II was remanded for re-examination and de novo adjudication.
(iii) The demand for issue IV was upheld with interest, but the penalty was dropped.
(iv) Issue V was not under consideration as the demand was already dropped.

Disposition:
The appeal was disposed of as per the above findings, pronounced in open court on 14.12.2017.

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