TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1535
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....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 to their respe....
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....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 in view of the above, levy of Brand Promotion Servi....
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....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 Microsoft are at actual, thereby making the Appellants....
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....ractitioners [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 clearly spell out the interpretation on the issue. 4.7 The Constitution Bench judgme....
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.... 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, Pune [1997 (91) ELT 540 (SC)] (Advertisement made by dealer benefitted in equal degree the Appellant therein and ....
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....; 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 submitted that the impugned order classifying he services under the category of BAS is beyond the show cause notice issued to the Appellant in as much....
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....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 payment received in Indian Rupees from an Indian entity who had in turn received consideration in foreign currency has to be treated as receipt in foreign currency only. Reliance is placed on ....
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....ansaction 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)] - CC.Ex. vs. HMM Ltd reported in 1995 (76) ELT 497(SC) - There can be no levy of penalty in terms of both Section 76 and Section 78. - Appellant is entitled to the benefit of Sectio....
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....ards - 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 improving product quality and customer support as well as promoting Microsoft Technologies. - In consideration of company's successful completion and accomplishment of the agreed milestones activities, Microsoft will offer company an agreed amount for Market Development Activit....
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....bmitted 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 activities for branded Qualifying Licensee Products. Further in para 15 and para 15.1 of the show-cause notice concluded the allegation that why the service rendered by INTEL and MICROSOFT viz. promotion of INTEL Inside brand and MICROSOFT technologies should not be treated as taxable services under the category of 'Business Au....
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....or 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 Inside/MICROSOFT. 8. The issue came up before this Tribunal in the case of Jetlite (India) Ltd. (supra) wherein the allegation was that as per the agreement between Sahara Corporation and Jetlite (India) Ltd. in order to promote business of Sahara Corporation by Jetlite (India) Ltd. Accordingly, the business activity of Sahara Corporation in relation to housing....
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....try 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 also common to various software like Windows 95, Win-98, Win 2000 etc. Moreover, as per the advertisement in the newspaper regarding the product is merely for promoting the sale of computers manufactured by the appellants which are having the features of Intel/Microsoft which does not mean is the activity or promoting/marketing or sale of the goods manufactured by t....
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....e 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 advertising its product, the logos of INTEL and MICROSOFT were also advertised; that the purpose of such advertising was that the products of INTEL & MICROSOFT were being used in its (Datamini) product; that while purchasing the said products form INTEL & MICROSOFT, Datamini was entitled for a percentage of market expense support from INTEL & MICROSOFT. That these amounts were not paid t....
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....f 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: "Exhibit D to the said agreement lays down that in consideration of Datamini's successful achievement of the following mile stone activities. Microsoft would offer a fixed amount per Windows Licence for market development activities. The activities listed and the description given are as follows:- (i) PC certification which is related to DAT....
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....mer 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 discussed above, amounted to a taxable service, as defined in the Act. 15.9 In para 15.1 of the show cause notice, it has been proposed to classify the service rendered by the notice to INTEL and MICROSOFT under the category of 'business auxiliary service' as defined in section 65(19) read with section 65(105)(zzb) of the Finance Act. 15.10 From the extracts of the show cause notice as detailed above, especiall....
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....g 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 support the sale of fully assembled computer systems pre-installed with Windows software; * Feature prominently the Company brandname and contact information of the Noticee; * An appropriately displayed ' genuine Windows Advantage statement. In para 1.6 of the reply to the show cause notice, it has been stated as follows: ....
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.... 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, especially the underlined portions, it is crystal clear that the notice understood the allegation as they were promoting the sale of Intel brand Processors and Microsoft brand software. That is why they have taken pains to explain that what they were promoting was their own manufactured goods and not those belonging to the brand owners. If they had understood the show cause notice in any other way, there was no need to explain that the consideratio....
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....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 treated as an activity liable to service tax; 3. Amount received from Microsoft and Intel in the nature of mere re-imbursement of expenses and can not be treated as an amount liable to service tax; 4. Amounts received from 'Intel' are in foreign convertible exchange and hence is not liable to service tax; 5. The show cause notice is time barred, hence extended period of limitation can not be invoked; &n....
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....t, 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 integrator a worldwide, non-exclusive, non-transferable, royalty free revocable license to use and display the Licenced Materials and in-Store Promotional Material solely to advertise and promote Qualifying Licensee Products and Platform-Compliant QLP in accordance with the instructions provided by Intel. No other right, title, or license is granted hereunder." Definitions of the various terms used in clause 2 are as follows:- "1.7 "Licensed Logos" shall mean the Processor Log....
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....ves the details of Licenced Logos is reproduced hereunder: 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 Track 2 are given herein below:- "Welcome to the Intel Inside Program (Called "Program" in the document). The purpose of this program is to positively promote the Intel Inside Brand and to encourage demand creation activities for branded Qualified Licensee Products (QLPs) i.e., Computer Products that are based exclusively on Qualifying Intel Processors (QIP)." 2.1 Eligibility To be....
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....her 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 Licencee; (2) The service to be rendered is to advertise the QLPs prominently displaying the Licenced Logos for Intel for Processors specified in Annexure B of the agreement; (3) Licenced Logos in Annexure A is the logo for the processor and the trade/brand name of the processor is contained in the logo; (4) The advertisements have to be placed in various media such as Print, Signage, Audio/Video, Online Media and Intel-cr....
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....ads 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 above should be messaged prominently on: Support page of COMPANY WEBSITE "Visit www.microsoft.com/genuine " to check if your windows is genuine 25 25 3 Windows Tagline Run at least two print advertisements (minimum 60 Column Centimeters) in a daily newspaper fro COMPANY desktop PC Systems and/or Laptop/Notebook PCs with Windows XP (Professional, Home or Media Center Edition), This advertisement must not contain any Desktop and /or Laptop/Notebook PC configuration that are preloaded with an operating system that is not Microsoft Window....
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....osoft 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. If it is treated as "service" then it becomes promotion/marketing of service. In other words, whichever way onje looks at the transaction, the activity is for promotion/marketing of goods or service of the client. It is not a promotion of logo/brand name of the client as wrongly assumed in the Ld.Member (Judicial)'s order. It is further revealed that the payment for the services rendered is received in Indian Rupees and not in any convertible foreign exchange for undertaking the promotional activities in India through placement of advertisements in the media. 16.10 It will also relevant to see how t....
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....y 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 client. The payment of consideration was subject to the service provider (noticees in this case) undertaking certain promotional activities in India by way of advertisements. Therefore, the said activity squarely comes under the purview of Business Auxiliary Service as defined in the Finance Act, 1994 and is liable to service tax accordingly. These facts emerge as bright as daylight from the terms and conditions of the agreement entered into between the noticees and M/s INTEL & MICROSOFT and the advertisements placed by the appellants in terms of the said agreements. 17.3 The findings of the hon'ble Member (Judicial) that the ac....
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....ed 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 remain taxable under "Business Auxiliary Service" and not under "Brand Promotion Service", It is a well-settled principle of interpretation that "courts in construing a statute will give much weight to the interpretation put upon it at the time of its enactment by those whose duty has been to construe, execute and apply the same enactment" [as held by the hon'ble apex court in Collector of Central Excise, Guntur vs. Andhra Sugars Ltd. - 1989 AIR 625]. The same position was affirmed by the hon'ble Apex Court in the case of K.P. Varghese vs. ITO Ernakulam [ (1982) I SCR 629] wherein it was held that ' the meaning ascribed by the authority....
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....n 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 liability or otherwise to service tax. Accordingly I proceed to examine these issues. 18. The next issue for consideration is whether the services rendered by the appellants can be considered as export of service during the relevant period and therefore, not liable to service tax., as contended by the appellants. The argument advanced is that the recipient of service, i.e. INTEL & MICROSOFT do not have ny establishment or office in India, the service should be treated exported, as recipient is located outside India and also benefit accrued to recipient located outside India. The argument advanced is that the recipient of service, i.e. INTEL & MICROSOFT do not h....
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....a 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 (1).......not relevant.......... (2)......not relevant.............. (3) in relation to taxable services other than- (i) the taxable services specified in sub-clauses (a), (f), (h),(i),(j),(l)......................(zza), (zzc),(zzd).........and (zzv); and (ii) ...........not relevant.................. (i) such taxable services which are provided and used in or in ....
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....d 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, the service should have been delivered outside India and used in business outside India. Business auxiliary service which is undertaken in the present case is promoting/marketing the service recipient's products in India through advertisements placed in the Indian media. Service is delivered when the advertisement is placed. This placing of advertisement takes place in India and hence the delivery also takes place in India and not elsewhere. Secondly, can it be said that the use of the service is outside India? Business promotion is in relation to the Indian market and for the Indian consumers. If that be so, how can it be said that the use of the service is elsewhere than in India. The same pos....
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....ency 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 the General Agreement on Trade in Services (GATS). This Agreement recognized four modes of delivery of services in the case of exports. These are - 1. Cross Border - The service itself crosses the border 2. Consumption Abroad - The consumer travels across the border 3. Commercial Presence - Establishment of an office or industry 4. Movement of Natural Persons - The service supplier travels across the Border 18.11. These principles can be diagrammatically represented as follows:- USER In India Outside India USE In India 1 (Taxable) 2 (Taxable) Outside India 3 (Taxable) 4 (Export) 18.12. Thus only wh....
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....ted 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 hence leviable to service tax. 18.15. The CBEC had clarified the position relating to applicability of the provisions of the Export of Service Rules, 2005 in certain situations vide circular No.141/10/2011-TRU dated 13-5-2011. The relevant portions of the said circular are extracted herein below:- "f 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 considered view such an interpretation would be totally irrati....
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....d 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 registration; under Section 76 for the default in payment of service tax; under S....
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....the Members of the Bench, therefore, the matter is placed before the Hon'ble President to refer it to a 3rd Member to decide the issue on the following points:- Difference of Opinion Whether the Member (Judicial) is correct in holding that the appellants are engaged in the activity of promoting the brand of Intel/Microsoft consequently, the activity of 'promotion or marketing of logo or brand' does not cover under the category of Business Auxilliary Service by relying on the judgment of Jetlite (India) Ltd. (supra). Or Whether the Member (Technical) is correct in holding that the appellants are engaged in the activity of promoting the branded goods of Intel/Microsoft, therefore, the judgment of Jetlite (India) Ltd., (supra) is not applicable to the facts of this case and the demands are rightly confirmed under the category of Business Auxilliary Service and the extended period of limitation has rightly been invoked. (Order pronounced on 20.06.2012) ORDER ON DIFFERENCE OF OPINION Shri C J Mathew, Member (Technical) Order No. A/94489-94490/16/STB 22. This matter is placed before me for resolution of difference arising from the separate order authored by Hon'ble Membe....
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....eriod from 1st July 2003 to 31st August 2006 and from 11th July 2003 to 28th February 2007. 24. I must confess to being confronted with a predicament in resolving this difference of opinion as the order of Hon'ble Member (J) concludes with his finding that the said contributions of M/s Intel Corporation and M/s Microsoft Corporation are not liable to tax under section 65(105) (zzb) of Finance Act, 1994 but Hon'ble Member (T) has, besides confirming liability to tax under this head, gone on to render findings against appellants on the claim that the said consideration is exempted from tax being an export and on the claim that the demands are barred by limitation prescribed in section 73(1) of Finance Act, 1994. As Hon'ble Member (J) did not find it necessary to consider these aspects, it is moot whether there is a difference of opinion on these aspects of the order of Hon'ble Member (T) and whether the scope of the reference placed before me permits record a finding thereon. 25. However, I notice that the difference of opinion concurred with by both Hon'ble Members does include the issue of limitation as decided upon by Hon'ble Member (T) and must, therefore, be addressed by me in....
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....by professionally qualified persons. They are well aware of the laws for the time being in force and they have to comply with such laws. They have neither informed the Department of the chargeability nor have they obtained any clarification about the taxability of the revenue forming pat of their main income. There is no evidence of any correspondence with the jurisdictional Central Excise officers on this issue or with any Departmental Officers. It was only when the Revenue authorities came to know that they were rendering taxable services against receipt of monetary considerations that the investigations were initiated against them. 04.20. Their argument that they were under a genuine belief that it was not rendering any promotional activities with respect to brand of "Microsoft" or "Intel" and consequently not required to pay Service Tax on these activities is not acceptable. The proviso to Section 73(1) of the Act is rightly invoked in this case as the Noticees failed to declare the value of taxable service for charging service tax under section 67 of Chapter V of the Finance Act 1994, in the ST-3 returns. The Noticees failed to adduce any documentary evidence to the effect th....
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....rs have cited elaborately from the show cause notice to support their respective findings; Hon'ble Member (T) has come to the conclusion that the authority issuing the notice , the appellants and the adjudicating authority had all addressed the issue of the use of the logo of M/s Intel Corporation and M/s Microsoft Corporation in publicity advertisement materials of the appellants as promotion of the products of the latter and, therefore, Tribunal was not required to assume any other interpretation. I do not propose to delve further into this aspect as, in my opinion, the impugned order, the activity under scrutiny and the definition of 'business auxiliary service' should suffice for determination of taxability and applicability of the decision of the Tribunal in Jetlite (India) Ltd v. Commissioner of Central Excise, New Delhi [2011 (21) STR 119 (Tri-Del)] that has been relied upon by both sides in their submissions. Learned Authorized Representative contended that the two entries viz., 'brand promotion' and 'business auxiliary service' are entirely different activities and incorporation of the former in section 65(105) does not cast out the tax burden that did always subsist as ar....
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....cific entry was not covered by general entry prior to the introduction of specific entry. But that is not the case in the matter in hand. In our case, the earlier entry speaks of Business Auxiliary Services of the client, whereas the subsequent entry speaks of display of logo per se to be amounting to promotion and advertisement of the business activity of the client. In relation to the earlier entry, the activity conducted by the service provider should disclose promotion and marketing of the service rendered by the service recipient to the others and there must be tangible evidence to establish the same. In case of subsequent entry mere fact of display of logo of the service recipient would lead to presumption about promotion and advertisement of the business of the client. Such a presumption is not available in case of earlier entry. 104. Perhaps, the contention that the appellants were required to prove that the display of logo was not helpful to promote real estate business when the source of information was given to the passengers for promoting and marketing the project of Sahara Corporation would have some relevancy if the period involved was subsequent to the new entry reg....
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....pellant for rendering of services. 33. Appellants use the products of M/s Intel Corporation and M/s Microsoft Corporation not to sell them as such but to manufacture personal computer; the portion of the definition supra relating to sale of goods referred to in section 65(19)(i) will not, therefore, apply to the present dispute. Marketing has many connotations ranging from the most common one, of a foray for purchases, to the professional one, of describing an organized discipline in management of commercial organizations. In the context of its employment in the definition supra, it would appear that legislative intent tends towards the latter. Marketing professionals consider the four Ps to be at the very foundation of their vocation, viz., price, product, promotion, and place. Unless all the four facets are mixed in the formulation of strategy, the expression 'marketing' may not be an appropriate usage and will not apply to the activity undertaken by the appellants. 34. The proceedings culminating in the impugned orders would, consequently appear to rest on the allegation that appellants are paid consideration for promotion of goods produced by M/s Intel Corporation and M/s Mic....