2025 (12) TMI 1074 - AT - Service Tax

Procuring export orders in India for foreign principals treated as 'export of service' u/r 3, tax demand set aside

Whether procuring export orders in India for a foreign principal constituted 'export of service' under Rule 3(1)(iii) read with Rule 3(2) of the Export of ... Export of service as per Rule 3 (1) (iii) read with Rule 3 (2) of the Export of Service Rules 2005 or not - activity of procuring export orders for the foreign company - invocation of extended period of limitation - HELD THAT:- It is found that indisputably the appellant procures orders on behalf of K.W situated in Germany and does not have any right to settle the order in the name of K.W. Pursuant to the orders received, the overseas company supplies the goods directly to the customers and after full payment of the invoice amount by the customer to the overseas company, pays the commission in respect of such orders to the appellant. It is found that in the decision in A.T.E Enterprises Pvt Ltd vs Commissioner of Service Tax, [2015 (2) TMI 241 - CESTAT MUMBAI], a coordinate bench of this Tribunal, in identical fact circumstances has held that the services provided are not taxable. The ratio would squarely apply to the facts and circumstances of this case - the impugned order in appeal is unsustainable - Appeal allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the activity of procuring orders in India for an overseas principal, for which commission is received from the overseas principal after realization of sale proceeds, constitutes 'export of service' so as to be non-taxable in India, or is taxable as 'Business Auxiliary Service'. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Procuring orders for an overseas principal-export of service vs. taxable Business Auxiliary Service Legal framework (as discussed by the Court): The Court examined the classification and taxability of the activity under 'Business Auxiliary Services' and addressed the appellant's claim that the service qualified as 'export of service' under the Export of Service Rules, 2005, as invoked in argument and applied through the Tribunal's relied-upon precedent. Interpretation and reasoning: The Court treated as undisputed that the appellant procured orders on behalf of an overseas entity located in Germany; the appellant had no right to settle orders in the name of the overseas entity; the overseas entity directly supplied goods to Indian customers; Indian customers paid the overseas entity directly; and only after full payment did the overseas entity pay commission to the appellant. On these facts, the Court applied the ratio of a coordinate bench decision rendered in identical circumstances, which held that the activity is confined to procurement of orders and that the service, if any, is rendered to the foreign/overseas manufacturer, even though the transaction culminates in supply to an Indian buyer. The Court rejected the consumption-in-India approach accepted in the impugned order, holding instead that the governing ratio treats such procurement/promotion for a foreign principal as not taxable in India when the service is to the overseas recipient. Conclusions: The Court concluded that the appellant's commission-earning activity of procuring orders for the overseas principal amounts to export of service and is not liable to service tax in India. Consequently, the impugned order was held unsustainable to the extent it sustained the service tax demand and penalty, and it was set aside with consequential relief.