Export of service depends on recipient and place of consumption, not merely where marketing work is performed.

Services rendered to a foreign principal for solicitation of orders and marketing support were treated as export of service under the Export of Services Rules, 2005 because the recipient was outside India, the consideration was received in convertible foreign exchange, and the recipient had no office or commercial establishment in India. The decisive test was the place of consumption and benefit, not merely where the activities were performed. Although the work was carried out in India and supported sales to Indian customers, the service was consumed by the foreign recipient abroad, so it remained exported service and fell outside the service tax net. The demand was therefore unsustainable.

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Issues: Whether the services rendered to a foreign principal in connection with solicitation of orders and marketing support constituted export of service under the Export of Services Rules, 2005, so as to be outside the service tax net.

Analysis: The services were rendered to a recipient located outside India, the commission was received in convertible foreign exchange, and the recipient had no office or commercial establishment in India. The decisive test was whether the services were delivered and used outside India. Applying the settled law that export of service is determined by the recipient and destination of consumption, not merely by the place where activities are performed, services undertaken in India at the behest of a foreign recipient can still qualify as export. The marketing and order-procurement activities were held to be consumed by the foreign company abroad, and the sales in India to Indian customers did not alter the character of the service as exported service.

Conclusion: The services qualified as export of service and no service tax was payable on them. The demand was unsustainable.

Ratio Decidendi: For business auxiliary services, where the recipient is located outside India and the benefit of the service accrues to that foreign recipient, the service is treated as exported if the place of consumption is outside India, even if the activities are performed within India.

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