Appellant's Foreign Services Qualify as Exports Under 2005 Rules

The Tribunal held that the services provided by the appellant to foreign companies qualified as export of service under the Export of Service Rules, 2005. The demand for service tax amounting to Rs. 1,67,47,188/- was deemed unsustainable, and the Commissioner's order was set aside. The appellant was not liable to pay service tax on the commission received from foreign companies.

---

---

Issues Involved:
1. Demand of service tax on services rendered to foreign companies.
2. Classification of services as "business auxiliary service" (BAS).
3. Applicability of Export of Service Rules, 2005.
4. Interpretation of the term "used outside India."
5. Validity of the Commissioner's order dated October 3, 2012.

Issue-wise Detailed Analysis:

1. Demand of Service Tax on Services Rendered to Foreign Companies:
The primary issue in this appeal is the demand of service tax amounting to Rs. 1,67,47,188/- on services rendered by the appellant to foreign companies for the period 2006-07 to 2010-11. The appellant contended that these services amounted to export of service under the Export of Service Rules, 2005 (2005 Rules) and were not liable to service tax.

2. Classification of Services as "Business Auxiliary Service" (BAS):
The appellant is engaged in rendering "business auxiliary service" (BAS) and represents various foreign companies in India, receiving commission in convertible foreign currency. The services include procurement of orders, assistance in tenders, negotiation with customers, collection of payments, and liaising activities. The Commissioner classified these services under BAS and confirmed the demand for service tax.

3. Applicability of Export of Service Rules, 2005:
The appellant argued that the services rendered to foreign companies should be considered as export of service under the 2005 Rules and thus not liable to service tax. The Commissioner, however, did not accept this explanation, stating that the services were provided and used in India, and thus did not qualify as export of service under Rule 3(2)(a) of the 2005 Rules.

4. Interpretation of the Term "Used Outside India":
The Commissioner interpreted Rule 3(2)(a) to mean that for a service to qualify as export, it must be delivered and used outside India. The appellant argued that since the foreign clients were located outside India and did not have any office in India, the services should be deemed to have been delivered and used outside India. The Commissioner rejected this argument, stating that the services were provided in India and the benefits accrued to foreign clients did not imply that the services were used outside India.

5. Validity of the Commissioner's Order Dated October 3, 2012:
The Commissioner relied on two Circulars dated February 24, 2009, and May 13, 2011, to support the view that the services provided by the appellant did not qualify as export of service. The appellant, however, cited various judicial decisions to argue that the promotion and marketing of goods of foreign companies in India would qualify as export of service. The Tribunal examined these decisions and found that the services provided by the appellant were meant for and used by foreign clients, thus satisfying the conditions for export of service under the 2005 Rules.

Conclusion:
The Tribunal concluded that the services rendered by the appellant to foreign companies qualify as export of service under the 2005 Rules, both prior to and after the amendment on February 27, 2010. The demand for service tax was not sustainable, and the Commissioner's order dated October 3, 2012, was set aside. The appeal was allowed, and no service tax was payable by the appellant on the commission received from foreign companies.

---