Export of services, notice cure, and service classification principles led to partial relief in a service tax dispute.

Consideration received in foreign exchange from a foreign principal for marketing and technical support services rendered in India was treated as export of services, so the related service tax demand was unsustainable. A corrigendum issued after the reply, which gave a service-wise breakup and was followed by a further reply and personal hearing, was held to cure the alleged vagueness and avoid a natural justice breach. The conferencing facility was not shown on the record to be rendered through the internet, so classification as internet telecommunication service could not be sustained. The appeal succeeded in part, with the major service tax demands and penalties set aside.

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Issues: (i) Whether the consideration received from foreign principals for marketing and technical support services rendered in India amounted to export of services and was not exigible to service tax; (ii) Whether the corrigendum to the show cause notice issued after the reply cured the alleged vagueness and complied with natural justice; (iii) Whether the conferencing facility was correctly classified as internet telecommunication service.

Issue (i): Whether the consideration received from foreign principals for marketing and technical support services rendered in India amounted to export of services and was not exigible to service tax.

Analysis: The consideration for the impugned services was received in foreign exchange from the foreign principal. The service recipient was outside India and the activities were treated, on the facts and the case law relied upon, as export of services.

Conclusion: The demand on this count was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the corrigendum to the show cause notice issued after the reply cured the alleged vagueness and complied with natural justice.

Analysis: The original notice was followed by a corrigendum setting out the service-wise breakup after the reply was received. The assessee was granted an opportunity to file a further reply and was also given a further personal hearing. The procedural objection therefore did not establish denial of opportunity.

Conclusion: The challenge to the corrigendum on the ground of vagueness and breach of natural justice was rejected.

Issue (iii): Whether the conferencing facility was correctly classified as internet telecommunication service.

Analysis: The record did not show that the conferencing facility was rendered through internet. On the available invoice and material, the departmental classification as internet service could not be sustained.

Conclusion: The demand under internet telecommunication service was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded in part. The major service tax demands and the internet telecommunication service demand were set aside, while the demands admitted or otherwise sustained on the remaining services and the related procedural objection were not interfered with, and the penalties were deleted.

Ratio Decidendi: Service tax is not leviable on services rendered in India for a foreign principal where the consideration is received in foreign exchange and the transaction constitutes export of services; a show cause notice defect is cured where the assessee is given a meaningful post-corrigendum opportunity to reply and be heard; classification must rest on the actual nature of the service established by the record.

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