Tribunal rules in favor of appellant on export services, exempts from service tax

The Tribunal ruled in favor of the appellant, holding that the Marketing Support Services (MSS) provided to Microsoft Singapore qualified as export of services under the Export of Service Rules, 2005, making them not liable to service tax. The reimbursements related to MSS and Product Support Services (PSS) were also deemed non-taxable. However, the issue of service tax on foreign currency expenditures was remanded back to the adjudicating authority for further review. The demands regarding MSS export status and reimbursements were set aside, and the appeals were disposed of accordingly.

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Issues Involved:
1. Marketing Support Services (MSS) - Export status
2. Reimbursement in relation to MSS
3. Reimbursement in relation to Product Support Services (PSS)
4. Service tax on foreign currency expenditure

Detailed Analysis:

1. Marketing Support Services (MSS) - Export Status

The primary issue was whether the Marketing Support Services (MSS) provided by the appellant to Microsoft Singapore qualify as export of service under the Export of Service Rules, 2005, and thus, whether the consideration received, including reimbursements, is not taxable. The Tribunal referred to the Larger Bench decision in the appellant's own case (Microsoft Corporation India Pvt. Ltd. Vs. CST - 2014 (36) STR 766), which held that the customer for MSS is Microsoft Singapore, and the benefit of the service accrues outside India to Microsoft Singapore. Therefore, the MSS rendered to Microsoft Singapore would amount to export of services and are not liable to service tax. The Tribunal followed this precedent and held that the services being provided by appellants satisfy the conditions of Export of Service Rules, 2005, hence are not liable to service tax.

2. Reimbursement in Relation to MSS

The second issue was whether the reimbursement received for MSS should be included in the taxable value. The demand confirmed on this account was for the period 2006-2007 to 2008-2009, amounting to Rs. 36,64,48,321, as the value of such reimbursements was not included in the value of MSS. However, for the period 2009-2010 to 2010-2011, the demand was dropped as the value of MSS was inclusive of such reimbursements. Since the Tribunal held that the Business Auxiliary Services in relation to MSS qualify as export of services, the reimbursement in relation to MSS would also not be liable to service tax.

3. Reimbursement in Relation to Product Support Services (PSS)

The third issue was whether the reimbursement received for Product Support Services (PSS) rendered by the appellant is taxable for the period from 09.07.2004 to 31.03.2005. The Tribunal noted that the product support services have been held to be non-taxable in the appellant's own case by the Division Bench of the Tribunal (Final Order No.53737/2014 dated 23.09.2014). Accordingly, the demand on this issue was set aside.

4. Service Tax on Foreign Currency Expenditure

The fourth issue was whether certain foreign currency expenditures incurred by the appellant from April 2006 till March 2009 are taxable under the Act. The Tribunal observed that the Commissioner had confirmed the demand of Rs. 65,52,957 for the period 17.04.2006 to 31.02.2009, while the demand for the period before this was dropped based on the Bombay High Court judgment in Indian National Shipowners Association Vs. UOI (2009 (13) STR 235 (Bom.)), and the demand for the subsequent period was also dropped as the appellant provided the required particulars. The Tribunal remanded the matter back to the adjudicating authority to pass a fresh adjudication order after giving the appellant a fair opportunity to defend their case, emphasizing the need for the Department to specify the relevant taxable category under Section 65(105) of the Act for demanding the service tax.

Conclusion:

The Tribunal set aside the demands in respect of MSS export status, reimbursement in relation to MSS, and reimbursement in relation to PSS. The matter concerning service tax on foreign currency expenditure was remanded back to the adjudicating authority for fresh consideration. The appeals were disposed of accordingly.

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