Export of service treatment for order procurement for a foreign principal defeats Business Auxiliary Service tax liability.

Procurement of export orders in India for an overseas principal was treated as export of service, not taxable under Business Auxiliary Service, because the appellant had no authority to conclude contracts, the foreign principal supplied goods directly, and commission was paid only on realisation. Applying Rule 3(1)(iii) read with Rule 3(2) of the Export of Service Rules, 2005, and following coordinate bench decisions on similar facts, the service was regarded as rendered for and consumed by the foreign principal outside India. The service tax demand, with interest and penalties, was therefore unsustainable.

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Issues: Whether the appellant's activity of procuring export orders for a foreign principal amounts to export of service and is therefore not liable to service tax under Business Auxiliary Service.

Analysis: The appellant procured orders in India for an overseas company, had no authority to conclude the orders on its behalf, and the foreign company supplied goods directly to the customers while paying commission to the appellant on realisation. Applying Rule 3(1)(iii) read with Rule 3(2) of the Export of Service Rules, 2005, and following the coordinate bench decisions on materially similar facts, the service was held to be rendered for and consumed by the foreign principal outside India and not taxable in India. On that basis, the demand, interest and penalties could not be sustained.

Conclusion: The activity constituted export of service and the demand of service tax, interest and penalty was unsustainable; the appeal succeeded for the assessee.

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