Tribunal rules in favor of appellant on service tax exemption for export services.

The Tribunal ruled in favor of the appellant, holding that the sales promotion and marketing services provided outside India qualified as export of service under the Export of Service Rules. The services were deemed not liable to service tax. Additionally, the demand for service tax on services received from foreign agents was set aside due to a procedural lapse, with the appellant being entitled to exemption under Notification No. 18/2009-ST. The Tribunal also decided not to impose a penalty, considering the appellant's compliance with tax payments and lack of malicious intent.

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Issues involved:
- Demand of service tax for sales promotion and marketing services provided outside India
- Demand of service tax for sales promotion and marketing services received from foreign based agents under Reverse Charge basis

Issue 1:
The appellant argued that the sales promotion and marketing services provided in a foreign country to a foreign company, with payment received in foreign exchange, constitute export of service under Export of Service Rules. The appellant cited relevant case laws and Circular No. 111/5/2009-ST to support their position. The Tribunal examined Rule 3(1) of Export of Service Rules and concluded that the services provided by the appellant fall under the category of Export of Service, as the recipient was located outside India and payment was received in India. Citing a previous judgment, the Tribunal held that the services qualify as export of service and are not liable to service tax.

Issue 2:
Regarding the demand of service tax for sales promotion and marketing services received from foreign based agents, the appellant contended that they paid service tax and interest up to a certain date, and claimed exemption under Notification No. 18/2009-ST dated 07.07.2009. The exemption was denied due to a procedural lapse of not mentioning invoice number in shipping bills. However, the Tribunal found that the input service received was meant for export of goods, and apart from the procedural lapse, there was no other violation of the notification. The Tribunal held that the appellant is entitled to the exemption and set aside the demand. Additionally, the Tribunal decided that no penalty should be imposed on the appellant as they had paid the service tax, were entitled to Cenvat credit, and there was no malafide intention. Therefore, the penalty was set aside.

In conclusion, the Tribunal allowed the appeal in favor of the appellant, ruling that the services provided by them qualified as export of service and were not liable to service tax. The demand under the Reverse Charge mechanism was set aside, and no penalty was imposed on the appellant.

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