TaxTMI 
TaxTMI 
2012 (12) TMI 274
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....y both the brand owners periodically. Therefore, it appeared that the services provided by the appellants are taxable under 'Business Auxiliary Service' as per Finance Act, 1994 effective from 01.07.2003. It was found that the appellants were not discharging their service tax liability on the commercial considerations received by them from the two brand owners. Therefore show-cause notices were issued dated 11.04.2007 for the period 01.07.2003 to 28.02.2007 in the case of Zenith and dated 30.03.2007 for the period 01.07.2003 to 31.08.2006 in the case of Datamini. The matters were adjudicated, demands of service tax along with interest and various penalties were confirmed against the appellants under the category of 'Business Auxiliary Service'. Aggrieved by the same, the appellants are before us. 3. On behalf of Zenith Shri M.H. Patil, learned Advocate appeared before us and submitted that the issue involved in the matter are as follows:- (a) Whether service tax is payable under "Business Auxiliary Service" on the advertisements of computers (the Appellants final products), carrying a foot note "Intel Inside" and "Microsoft Windows" logos, belonging....
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....) STR J-137 (SC) (E) that the main purpose is to advertise Computers and inserting brands of "Intel" and "Microsoft" is just incidental, to the said main purpose, and, hence, such incidental activity is not subject to levy of service tax; (F) that as per clause (a) to Section 65A(2) of the Finance Act, 1994, for the purpose of classification of services, sub clause providing most specific description is to b e preferred to sub clauses providing a more general description; (G) that the Head of "Advertisement Agency Service" under Section 65(105)(e) of the said Act gives more specific description, than "Business Auxiliary Service" under Section 65(105)(zzb) of the said Act, and hence, the said activity of the advertisement of brands of Intel and Microsoft is correctly classifiable under "Advertisement Agency Service", and the Advertisement Agency is already paying service tax under the said Head. (H) that, subjecting the said amount of re-imbursement to service tax, again would lead to double taxation, in view of service tax already paid by the Advertisement Agency; (I) that ....
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....ces Rules, 2005 [Notfn.13/2006-ST dt. 19.4.2006] 9. Export of Services Rules, 2005 [2011-12] (K) that Ld. Commissioner, in impugned order takes cognizance of reimbursement of advertisement was received by them in convertible foreign exchange, but the benefit of export of service has been denied by the Commissioner solely on the ground that service was neither delivered outside India nor used in business outside India but consumed or u sed for business in India. (L) Ld. Commissioner accepts fulfillment of condition under Export of Service that order for provision of such service is made by the recipient of such service from any of his commercial or industrial establishment or any office located outside India. (M) that, even if value for services is received in Indian currency, benefit of export of service is available, based on the following judgments: i) Nipuna Services - 2009 (14) STR 706 (Tri) ii) CCE vs. Shelpan Export - 2010 (19) STR 337 (Tri) (N) that, the amounts re-imbursed from Intel and Mic....
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....ns. 4.3 The decision of Supreme Court judgment in All India Fedn. Of Tax Practitioners [2007 (7) STR 625 (SC)] would not be relevant to the case on hand, as vires of levy of service tax was under challenge and export in general was discussed. When the term 'export' has been given specific meaning under Export of Service Rules, taking recourse to general law, would not be correct. 4.4 The judgments directly on the issue would prevail. 4.5 The ratio of judgments to hold that subsequent entry still have prospective effect, the judgments of Hon'ble Bombay High Court in the case of Indian National Shipowners Assn. (supra) and the judgment of tribunal in the case of IBM India(supra), since have been upheld by the Hon'ble Supreme Court, the Tribunal's judgment cited by the Ld. Commissioner would be of no avail to Ld. Revenue. 4.6 The binding effect of Tribunal judgment in Nipuna Services (supra) would not be wiped out, since the same has not been stayed by High Court, although appealed against by Department and in any case, various other judgments, cited, on the issue have not been challenged by Department and the CBEC Circulars dated 24.2.2009 and 13.5.2011 cl....
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....demand under Business Auxiliary Service can be confirmed only if the Appellant is promoting sale of goods or marketing the sale of goods or selling the goods produced or provided by or belonging to the Intel and Microsoft. As stated above the Appellant is neither promoting, marketing or selling the goods Intel/Microsoft as the advertisement is for the sale of he computers manufactured by them and therefore no service is provided by the Appellant and in the event the same will not fall under the taxable category of Business Auxiliary Service. - Only services in relation to promotion or marketing or sale of goods produced or provided by or belonging to the client i.e., a third party entity, fall within the ambit of taxable entry of 'Business Auxiliary Services' - Fact that some benefit may have accrued to Intel and Microsoft has been wrongly perceived as promotion being made of the products of Intel and Microsoft. - Reliance is placed on: * Philips India Ltd vs. CCE, Pu....
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....45 (Del.) and All India Fed. Of Tax Practitioners v. Union of India - 2007 (7) S.T.R. 625 (S.C.) erroneous * It is submitted that the Reliance place by the Learned DR on the Judgment passed by the Hon'ble Delhi High Court in the case of Microsoft Corporation (India) Pvt. Ltd. v. Commissioner - 2008 (16) S.T.R. 545 (Del.) is erroneous as same is an interim order. * It is submitted that the Larger Bench of the Hon'ble Appellate Tribunal in the case of Surya Roshni Ltd. v. Commissioner - 2010 (260) E.L.T. 417 (Tribunal-LB) has held that interim order deciding a stay application cannot have the effect of binding precedent; * In any event the issue in the case of Microsoft (supra) has not attained finality as the same is pending before the Hon'ble Third Member. * It is further submitted that reliance cannot be place on the Judgment of the Hon'ble Supreme Court passed in the case of All India Fed. Of Tax Practitioners (supra) as the same does not deal with export of service Rules. 5.4 Impugned Order beyond the scope of SCN: - It is submi....
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....iciary of the service in the present case is situated outside India and therefore the services are used outside India. In this reliance is placed on Circular No.111/5/2009 - ST dated 24 th February, 2009 which clarifies that the phrase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Reference is also made to Circular No.141/10/2011-TRU, dated 13-5-2011. - For all the different periods set out above, the beneficial enjoyment of the services was always outside India and the services allegedly provided to 'Intel' at all times was an 'export of services'. * ABS India vs. CST, Bangalore [2009 (13) STR (65) Tri-Bang] * Blue Star vs. CCE, Bangalore [2008 (11) STR (23) Tri-Bang] * Lenovo (India) Pvt. Ltd. vs. CCEx, Bangalore [2010 (20) S.T.R. 66 (Tri-Bang.)] * Muthoot Fincorp Ltd. v. Commissioner - 2010 (17) S.T.R. 303 (Tribunal) - In any event it is submitted that pay....
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.... on the part of the present Appellant to evade any duty. - For there to be levy of penalty, the person alleged to have evaded payment of a tax must be proved to be aware of the taxability of the transaction and must deliberately have avoided payment of the tax - Intent to evade payment of a tax is, in law, much more than a mere failure to pay the tax - Burden of establishing intent to evade payment of a tax is that of the Revenue and must be established with cogent, positive evidence. Department failed in bringing on record any positive of intent to evade payment of service tax. - Reliance is placed on: - C.C.Ex. Aurangabad vs. Balakrishna Industries (2006) (201) ELT325 (SC) - Godrej Soaps vs. C.C.Ex. reported in 2004(174) ELT 25 (Tri-LB) - Tamil Nadu Housing Board vs. CCE reported in [1994(74) ELT 9 (SC)] - Hindustan Steeel Ltd v. State of Orissa reported in [1978 (2) ELT 159 (SC)]  ....
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.... in detail the following - - Payment requests from one Intel Marketing program. - Advertising through Intel Inside Program - Fixes tough advertising standards - Placing Labels on licensing system - Logo prominence/Position color/other specification. 6.1 He further submitted that in case of Datamini the actual expenditure incurred by them towards advertising and publicity charges as reflected in their balance sheets of respective period. This additionally proves that they are not merely advertising the logo but are also indulged in activities of promoting the sale of goods and are rendering the business auxiliary service which talks about promotion and marketing services as reflected in its ambit per the contracts. 6.2 He further submitted that M/s. Microsoft Corpn. (I) Ltd., the terms of agreement are as follows:- - The agreement defines a cooperative framework between Microsoft and company to improve end customer experience by ....
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.... that the bonafide belief cannot be taken recourse as held by this Tribunal in the case of Interscape vs CCE Mumbai - 2006 (198) ELT 275 (Tri - Mumbai) wherein it was observed that bonafide belief is not blind belief and it can be only bonafide when it is formed after all reasonable considerations. 6.10 Therefore, he submitted that the impugned orders are to be upheld and the appeals filed by the appellants are to be dismissed. 7. Heard and considered the submissions made by both the sides. 7.1 The allegation in the show-cause notice is that the appellants are engaged in brand promotion of "INTEL" and 'MICROSOFT' for which they have paid commercial consideration by both the owners and the said activity appears to be taxable under 'Business Auxiliary Service'. In paragraph 6 of the show-cause notice it is clearly mentioned that the above facts indicate that Zenith was intentionally promoting the INTEL INSIDE brand for INTEL & MICROSOFT technologies for MICROSOFT. Further, in para 7 it is recorded that the foregoing discussions lead to the inferences, viz., the service provided by ZENITH viz. that of promoting the INTEL Inside brand and to encourage demand creation a....
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....n who, while acting on behalf of another person- (i) deals with goods or services or documents of title to such goods or services; or (ii) collects payment of sale price of such goods or services; or (iii) guarantees for collection or payment for such goods or services; or (iv) undertakes any activities relating to such sale or purchase of such goods or services; (b) "excisable goods" has the meaning assigned to it in clause (f) of section 2 of the Central Excise Act, 1994 (1 of 1944). 7.3 The definition of 'Business Auxiliary Service' means promotion or marketing or sale of goods produced or provided by or belonging to the client. Therefore, for promoting or marketing or sale, there should be goods. As in the concluding paragraph of the sho-cause notice alleging that the appellants are engaged in the activity of promotion of INTEL Inside brand and MICROSOFT Technologies. There is no allegation that the appellants are promoting or marketing or selling the goods of INTEL In....
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....rder to classify any activity to be the service in the nature of business auxiliary service, the same should be relating to the promotion or marketing of some activity of the service recipient which should be in the nature of service provided to the clients. Mere promotion of a brand by itself did not amount to promotion or marketing of services till specific entry in that regard was made in the said Act and that was the understanding of the law makers. To bring into the tax net even mere promotion of a brand, the new entry was introduced in the said Act. It is only consequent to the said entry that mere display of brand could amount to promotion of services rendered by the client and not otherwise. Thereafter, it was held that the activity undertaken by them was of brand promotion and not to be included in the category of Business Auxiliary Service prior to 01.07.2010. 9. In this case also we have seen that putting the logo of MICROSOFT/INTEL do not specify which product of 'INTEL' or of 'MICROSOFT' is being promoted by the appellant. As the 'INTEL' is a common b rand for various products like 'CPU Chip', 'motherboard' etc. and MICROSOFT brand name is al....
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....e case of Jetlite (India) Ltd., the demand for service tax is not sustainable in law. This conclusion has been drawn by the ld. Member (Judicial) after reading the charges in para 6 , 7 and 15.1 of the show cause notice issued to M/s Datamini. 15.1 In my considered view, this interpretation on the scope of notice is contrary to the facts recorded in the show cause notice, the replies thereto filed by the appellants and the decision of the adjudicating authority in the matter. All the documents on record have to be read as a whole and in a harmonious way so as to understand the issues in contention and arrive at a balanced and unbiased view of the matter. It would be relevant and important at this juncture to see how the three different parties to the issue, the authority which investigated the matter and issued the show cause notice, the Noticee and the adjudicating authority understood and appreciated the matter. 15.2 Now let me take up the show-cause notice dated 30-3-07 issued to M/s DataMini Technologies (India) Ltd., one of the appellants. Para 3.1 of the said notice briefly narrates the submissions made by the notice as follows:- "that while advert....
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.... Edition, he stated that the arrangement was as per Microsoft Star System Builder Program for Market Development 2005-06;..................................... that the total payment reimbursements from MICROSOFT were also partly received as quantity rebates; ......................."(emphasis supplied) 15.4 The show cause notice in para 4.1 while dealing with the terms and conditions of the 'INTEL INSIDE PROGRAM' makes the following observations: "The General Requirements specified in Chapter 2 of the said Agreement has laid down that to be eligible to become a Licencee in Track 2 of the Program, a company must be a manufacturer or integrator of QLPs, advertise and sell the ALPs to end users or resellers under the Licensee's system brand name, purchase a minimum dollar amount of the Qualifying Intel Processors from an Intel authorized source. Sellling counterfeit and/or remaked processors is prohibited and is ground for immediate termination from the program..." 15.5 Similarly in the case of Microsoft System Builder Program for Market Development 2005-06 (India only), in para 5 of the notice, the following points have been noted: &n....
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....nded Qualifying Licencee Products (QLPs), i.e., Computer Products that are based exclusively on Qualifying Intel Processors (QLPs); that the said Program offered Licencees a portfolio of marketing tools to achieve the above objectives. Similarly the agreement entered into between MICROSOFT & DATAMINI, defined a cooperative framework to improve end customer experience by improving product quality and customer support as well as promoting Microsoft technologies for which DATAMINI received a consideration on successful completion and accomplishment of the agreed milestone activities from MICRFOSOFT for market development activities. INTEL & MICROSOFT are registered trademarks of the respective companies." (emphasis supplied) 15.8 On the basis of the above findings the show cause notice in para 7(i) concludes as follows:- (i) The service provided by DATAMINI, vis., that of promoting the INTEL inside brand and to encourage demand creation activities for branded Qualified Licenceee Products that are based exclusively on Qualifying Intel Processors for INTEL and similarly, that of promoting MICROSOFT technologies for MICROSOFT, under respective agreements discusse....
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.........." In para 1.4 of the reply, the notice has further stated as follows: "The Noticee (System Builder) has also entered into a Star System builder program Agreement with Microsoft. Under the said agreement, at the time of purchase of the operating software license through a Microsoft OEM distributor of Microsoft, a certain amount accrued in favour of the Noticee, which is held in a co-operating market fund with Microsoft. The Noticee is entitled to reimbursement of certain expenses incurred by the Noticee for demand generation, market development and partner readiness activities from the amount accrued in the Co-operative Marketing Fund. The notice, to be eligible for the co-operative marketing fund scheme, should apart from purchasing a minimum stipulate number of Microsoft Operating System builder licences, also satisfy certain technical requirements like Microsoft Certification requirements, etc. Under the said Agreement and the Guidebook thereto, to be entitled to re-imbursement of expenses, the activities to be carried on by the notice should interalia satisfy the following requirements: * Directly....
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....owing submissions: "4.4.10 The considerationreceived by the Noticee from either Intel or Microsoft is in effect and in substance, a trade discount. With increase in the sales of the computers manufactured by the Noticee it is obvious tha the Noticee's purchase of the microprocessors and the operative software would also increase. This results in quantity or bulk purchases. The consideration received by the Noitcee is therefore, connected with the increase in sale of Intel or Microsoft to the Noticee and not for increasing the sales of Intel or Microsoft to the end customer through the Noticee, when in fact there are none." In para 4.5.2 of the reply to the show casue notice, it has been ineralia stated as follows: "4.5.2 The Noticee submits that even when it recommends "licenced Microsoft MS Windows XP Professional for Business as a part of its advertisement campaign, it is mainly for the purpose of rendering credibility to its own brand of computers, i.e. "Datamini"brand of computers so as to repose faith in the minds of the prospective customers". 15.13 From the extracts of the reply to the show cause notice enumerated above, ....
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....r , the adjudicating authority concludes as follows:- "The amounts received by the Noticees are undoubtedly in relation to services for promotion or marketing of the products of Intel/Microsoft. Since the Noticees are providing the services for promoting and marketing the products of Intel/Microsoft for monetary consideration, I hold the same as chargeable to service tax under the category of "Business Auxiliary Service" as defined under section 65(19) of the Act." 15.15 The order passed by the adjudicating authority, as evident from the extracts of the order cited above, clearly reveals a categorical finding to the effect tha the notice has been promoting the marketing of the products of Intel and Microsoft. 15.16 I have also carefully perused the grounds of appeal filed by the appellants Datamini in this case. The grounds urged are broadly as follows:- 1. Activities carried on only to promote the 'Datamini' brand and no activity or promotion or marketing or sale of goods produced by or belonging to the client; 2. Amount received from Appellant is only in the nature of a 'trade discount' and can not be....
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....ration is whether the services rendered by the appellants to INTEL & MICROSOFT were promotion of a logo or brand name of these companies or promotion of the products of these companies. The ld. Member (Judicial) has concluded that the services rendered were only promotion of logo and brand name and not the products of the logo/brand owner and accordingly he has held that the services rendered do not qualify to be considered as "business auxiliary service" as defined in the Finance Act, 1994. 16.1 In order to understand the issued in proper perspective, it is necessary to go through the various provisions of the agreement entered into by the appellants with INTEL & MICROSOFT. 16.2 Clause 2 of the Intel Inside Program Trade Mark Licence and Market development Fund Agreement entered into between Intel Corporation, California and the appellants, reads as follows:- "2. License Grant: Intel hereby grants and integrator accepts a world wide, non-exclusive, non-transferable, royalty free, revocable license to use and display the Licensed Logos in accordance with the terms of this Agreement, and the Intel Inside Terms and Conditions. Intel further grants integrat....
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.... mean Computer Products at the Integrator's brand, family, model or SKU based exclusively on Qualifying Intel Processors for which all of the systems represented by that brand, family, model or SKY name contain the Qualifying Intel Processors, as further defined in the Intel Inside Terms & Conditions. Integrator shall provide to Intel a list of all QLP and Platform Compliant QLP pursuant to the Intel Inside Terms and Conditions and Attachment C to this Agreement". Attachment B gives the details of Qualifying Intel Processors. They are as under:- Intel Itanium 2 processors Intel Itanium processors Intel Xeon processors Intel Pentium III Xeon processors Intel Pentium M processor Mobile Intel Pentium 4 Processors -M Mobile Intel Pentium III Processors - M Intel Pentium 4 Processors Intel Pentium III Processors Intel Celeron Processors Mobile Intel Celeron Processors 16.3 Relevant Extracts of Intel Inside Program - Terms & Conditions Trac....
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....Inside Logos. .................................................................... 4.1 Qualifying Licensee Products The program is intended to reimburse Licensees for advertisements that prominently feature QLPs along with Intel Inside Logos. QLPs are fully integrated and functional computer products that are based exclusively on Qualifying Intel Processors(QIPs)." 16.4 The agreement further stipulates conditions as to how the advertisements for the QLPs containing QIPs would be placed in various media and the contents of such advertisements. The reimbursement claims will be made directly to the Licencee via check, wire transfer or electronic funds transfer, with Intel paying the wire transfer bank fees. The bank beneficiary name must be the same as the Licencee's name in all cases. 16.5 From the terms and conditions of the agreement delineated above, the facts which emerge are as follows:- (1) The eligibility criterion is integrating Intel's QIPs in the QLPs of the Licencee and the quantum of consideration is also dependent on the purchase of the QIPs by the ....
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....t is as follows:- "3.1 Minimum activity under the Program Company shall implement "at least" two activities from the six milestone activities listed in Exhibit D hereof, during the Term of the Program in order to avail the MDA. Company shall inform before the commencement of the Program clearly stating the two milestone activities that it chooses to undertake during the Program. Exhibit D which lists out the Milestone activities and the Payout for the activities reads as follows:- "EXHIBIT D In consideration of Company's successful achievement of the following milestone activities, Microsoft will offer Company7 a fixed amount per Window Licence (COEM product purchased from an Authorized Distributor) for market development activities stipulate below: SL. NO Activity Description Payout/Unit Windows XP Professional Payout/unit Windows Home// Media Centre Edition1 1 PC Certification On Company successfully completing the Windows Logo Certification 25 25 2 Service Pack Support Company provides service pack support for all Company PCs that ship with windows XP The a....
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....s 100 units and the actual achievement is 150 units, e.g. 150% achievement to target; the payout will be capped at 130% (i.e. 130 units). Assuming that the actual achievement was broken up as 100 units of Windows XP Professional and 50 units of Windows XP Home, then the first payout will be calculated as 50X275+80X425= INR 47750 (Payout assumes that all of the milestone activities have been fulfilled)" 16.9 From the above terms and conditions of the Agreement with Microsoft, it is clear that to eligible for the Program, the Licencee should purchase a minimum number of Windows XP brand software from Microsoft and pre-load the same into the computer systems manufactured by the Licencee. Thereafter they should advertise in the media that the computer systems are preloaded with Windows XP software and should also recommend the use of the said software and/or affix Windows Genuine Advantage sticker. In other words, the advertisement is for the "Windows XP software" manufactured by MICROSOFT. Thus the service rendered by the Indian Company is for the promotion/marketing of Windows XP software. If computer software is treated as "goods", then it becomes the promotion/marketing of goods....
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...."any service in relation to- (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public relation services, and includes services as a commission agent, but does not include any information technology service." 17.1 The definition was amended in the Finance Act, 2004 to further expand the scope of the service by adding more activities. The said amendments are not relevant for our discussion as it does not affect our analysis. 17.2 As discussed in detail above, the noticees in the instant case were promoting the computer processors of INTEL and computer software of MICROSOFT for which they received a consideration. The consideration was paid out of the funds created wherein the money accrued on the basis of the purchase of goods/services from the clie....
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....and would attract tax under this service even if such promotions can not be directly linked promotion of a particular product or service. Many companies/corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/marketing/sale of goods, provision of services, holding of events, undertaking social activities, etc. If the brand name/housemark etc, is promoted by a celebrity without reference to any specific product or services etc., it is difficult to classify it under CAS. Such activities, like mere establishing goodwill or adding value to a brand would fall under this newly introduced service." 17.6 From the above clarification issued by the Ministry regarding the scope of the new service, the intention of the legislature is to cover promotion of brand name/housemark without reference to any specific product or service using a celebrity. As already discussed in the preceding paragraphs, it is amply clear that in the case under consideration what is being promoted is the product of INTEL & MICROSOFT, namely, computer processors and computer software. As per the Ministry's clarification, the said service continue to remai....
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....erred over that giving a general description. As discussed, Business Auxiliary service which relates to promotion/marketing of goods or service belonging to the client is more specific in the instant case than the promotion of brand. Even if it is assumed, for argument sake, that both services are equally applicable, then "earlier the better principle' envisaged in clause(c) of sub-section (2) would apply. In the instant case, the Business Auxiliary Service came into the tax net first in 2003 when compared to the brand promotion service which was brought under the tax net only in 2010. Thus if one follows the principle of classification enunciated in section 65A, the classification in the instant case will be under Business Auxiliary Service only and none else. 17.9 Since the Ld. Member (Judicial) has concluded that the activity undertaken by the appellant does not come under the purview of "Business Auxiliary Service", he has gone into the other issues raised by the appellants. Since I am disagreeing with the view of the ld. Member (Judicial) regarding the classification of the service, I need to examine the other contentions raised by the appellants regarding their liabili....
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....ear that the transaction involved is a domestic transaction and not exports. Therefore, the argument advanced that the transactions are export transactions is laid hollow by the facts available on record. Consequently, the judgments relied in support of the above contention also become totally irrelevant. Therefore, as far as the transactions with MICROSOFT are concerned, the benefit of exemption from tax available to export of services will not apply at all and I hold accordingly. 18.2 With regard to the services rendered to M/s INTEL, the agreement has been entered into with M.s Intel Corporation, USA. However INTEL has offices in India as mentioned in para 18 above. Business Auxiliary Services falls under clause (zzb) of section 65(105) of the Finance Act, 1994. The period of dispute in the instant case is from August 03 to June 06 in the case of Datamini and from July 03 to February 07 in respect of Zenith. The Export of Service Tax Rules, 2005 came into force on 15-3-05. Rule 3 of the said Rules deals with export of service, which reads as follows:- "3. Export of taxable service - The export of taxable service shall mean &nbs....
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.....4 The said rule 3 of the Service Tax Rules was substituted vide notification No.13/2006-ST dated 19-4-06 which remained in force till 22-5-07. As per the amended provisions, to be considered as export of service, two conditions had to be satisfied, namely, (a) such service is delivered outside India and used outside India; and (b) payment for such service provided outside India is received by the service provider in convertible foreign exchange. 18.5 The rule was further amended by notification 30/2007-ST dated 22-5-07, the conditions relating to export of service further underwent a change and the rule stipulated new conditions, as under; (a) such service is provided from India and used outside India; and (b) payment for such service is received by the service provider in convertible foreign exchange. 18.6 Thus the position which obtains for export of service is that the order for rendering the service should have originated from outside India. This conditions is satisfied since as per the agreement, the service recipient is Intel Corporation, USA. As regards the second condition, during 15-3-05 to 18-4-06, t....
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...., for the services rendered and the remittance of the proceeds in foreign currency. In the absence of any positive evidence in this regard, it is difficult to accept the claim of the appellant that they have received the payment in convertible foreign exchange and therefore, they are eligible for the aforesaid exemption. 18.9 The appellants have relied on the decisions of this Tribunal in the case of Nipuna Services and Shelpan Export in support of their contention that the transactions amounted to exports. We have perused the facts of those cases. In those cases there was clear evidence led by the service providers about raising the bill in foreign currency and receipt of the proceeds in foreign currency which was converted into Indian currency at the time of crediting the proceeds to the service providers. In the case before us, no such evidence has been adduced by the appellants. Therefore, the decisions of those cases can not be applied to the facts of the present case. 18.10. The Export of Service Rules owes it origin to General Agreement on Trade and Tariff. In the 8 th round of the GATT (Uruguay Round), negotiations were carried out in the area of services which led to....
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....operty based services and performance based services. Property based services cover service providers such as architects, interior designers real estate agents, construction services, mandapwalas, etc. Performance based service are services provided by service providers like stock brokers, practicing chartered accountants, practicing cost accountants, security agencies, tour operators, event managers, travel agents etc." ................................................................................................ 11. At this stage, we may state that the above discussion shows that what was the economic concept, that there is no distinction between consumption of goods and consumption of services is translated into a legal principle of taxation by the aforesaid Finance Acts of 1994 and 1998." 18.14. The above elucidation of the economic concept of service tax by the hon'ble apex court makes it abundantly clear that to make the service activity leviable to tax, the services should be rendered is promotion/marketing of the goods of the client in India by placing advertisements in the media. Such an activity is rendered in India and....
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....enjoyment of the service will of course depend on the nature of the service. For example effective use of advertising services shall be the place where the advertising material is disseminated to the audience though actually the benefit may finally accrue to the buyer who is located at another place. 4. This, however, should not apply to services which are merely performed from India and where the accrual of benefit and their use outside India are not in conflict with each other. ...................................... In order to establish that the services have not been used outside India, the facts available should interalia clearly indicate that only the payment has been received from abroad and the services have been used in India. ..................................................." 18.16. The above clarification makes it very clear that to be considered as "used outside India", the effective use and enjoyment should be outside India. In the case of promotion/marketing of goods/services in India, which promotes the business in India of the client (who is located outside India), can it be said that the effective use and enjoyment is outside India. In my....
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....rns, indicated the amounts of consideration received. The very fact they had obtained service tax registration for BAS clearly reveals that they knew about the scope of BAS. Had they entertained any doubts regarding the scope and coverage of the said service, it was imperative that they sought clarifications either from the department or any from any experts in the field. No such evidence is forthcoming from the records before us. The appellants are professionally managed Corporates and it is inconceivable that they did not ascertain their service tax liability from any one in spite of the service agreements entered into with their clients specifically provided for service tax liability on the appellants. In these circumstances, the argument of bonafide belief can not be entertained at all and it is purely an afterthought. Accordingly, there is absolutely no infirmity in invoking the extended period of time for demand of service tax in the instant case and I hold accordingly. 19. The last issue for consideration relates to imposition of penalty on the appellants. 19.1 The learned Commissioner has imposed a penalty under Section 75A of the Finance Act, for failure to obtain re....