TaxTMI 
TaxTMI 
2016 (12) TMI 1535
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....considerations were being paid by 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 "Mic....
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....held by Supreme Court - 2010 (18) 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;....
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....d by Notfn. 28/2005-ST dt. 7.6.2005] 8. For the period 19.4.2006 to 1.3.007: Export of Services 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. Shel....
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....rvice since has flown to overseas party it is export of service, based on various judgments and CBEC instructions. 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, cit....
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....ided by the Appellant to Intel/Microsoft. - It is submitted that 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 ....
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....se. 5.3 Reliance placed on the Judgments of Microsoft Corporation (India) Pvt. Ltd. v. Commissioner - 2009 (16) S.T.R. 545 (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 doe....
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....er for service is received from an entity situated outside India; - The beneficiary 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 F....
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....ion to evade payment of Service tax nor has there been any findings as regards the levy of penalty that here was any intent 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)] ....
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.... records to determine the accuracy of the MDFs. (g) The Contract talks 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 ....
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....on of Tax Practitioners - 2007 (7) S.T.R. 625 (S.C.). 6.9 The learned A.R. also submitted 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 provide....
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....e of goods, or provision or receipt of services, for a consideration, and includes any person 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 n....
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....egory of "Business Auxiliary Services" under the said Act. It was further observed that in order 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 var....
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.... as defined in the Finance Act, 1994 and hence, based on the decision of this Tribunal in the 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 narra....
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....em Builder - Co-operative Marketing Fund, and designed for Microsoft Windows XP Media Centre 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 (I....
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....ositively promote the Intel Inside brand and to encourage demand creation activities for branded 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, ....
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....for, that prominently and positively feature QLPs along with Intel Inside Logos..................." 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 satisf....
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....rketing the goods on behalf of the client." In para 4.4.10 , the notice has made the following 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 cus....
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....entitled to commercial considerations from Inter and Microsoft." In para 4.18 of the order , 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. A....
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.... this regard would not sub-serve the interests of justice. 16. The next issue for consideration 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....
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....ng Intel Processors. 1.15 "Qualifying Licensee Products" ("QLP") shall 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 A to the agreement which gives 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....
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....sp; This program is intended to reimburse Licensees for advertisements they have placed and are obligated to pay for, that prominently and positively feature QLPs along with Intel 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:- &nb....
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....Windows" means window XP Professional, windows XP Home Edition and Windows XP Media Centre Edition. The expectation from the Participant as per clause 3.1 of the Agreement 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 su....
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....tation of the Payout is also explained in the Agreement as follows:- "First Payout will be on Windows XP Home/MCE units followed by Windows XP Professional. For eg. If the target is 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 MICR....
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....hin the purview of "Business Auxiliary Service" as defined in the Finance Act, 1994. The definition of "Business Auxiliary Service" brought under the service tax net vide the Finance Act, 2003 reads as "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....
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....to remain classified under BAS. The difference between the services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand 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 unde....
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.... occurs first among the sub clauses which equally merits consideration;" 17.8 If we follow the above principles of classification the service which provides a more specific description should be preferred 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 appellant....
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....es rendered. The consideration (amounts) is indicated in Indian Rupees. In other words, payment is not received inconvertible foreign currency. These facts, which are not disputed, make it abundantly clear 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....
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....ervice should be outside India and the payment for the service rendered should be received in convertible foreign exchange. All the three conditions should be satisfied to be considered as export. 18.4 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 h....
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....remitter and on whose behalf the payments have been made. There is also no other evidence available in the records by way of bills/invoices raised in foreign currency by the appellants on M/s INTEL, USA, 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.....
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....t as excise duty is a tax on value addition on goods, service tad is on value addition by rendition of services. Therefore, for out understanding, broadly "services" fall into two categories, namely, property 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 serv....
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.... Agency or Media Company fees and commissions, talent charges, royalties, finance charges, freight charges, distribution, shipping and similar charges, inventory and any applicable taxes (including but not limited to value added taxes)." 18.20. These conditions in the agreements themselves should have alerted the appellants in respect of liability of pay service tax on the transactions. The Business Auxiliary Service was brought under the tax net in 2003 budget., One of the appellants, M/s. Datamini (known as GES Technologies Limited at that time) had also taken service tax registration from the jurisdictional central excise division at Daman under the category of "Business Auxiliary Service" (BAS) as early as in October,2004 vide STC Number AABCC3515EST001. Yet they did not inform the department of the existence of the agreement with INTEL and MICROSOFT nor did they, in their service tax returns, 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 sou....
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....clause (zzb) of Section 65 (105) of the Finance Act,1994. (b) The appellants are liable to service tax on the said activity for the impugned periods and, therefore, demands for service tax on the appellant under Section 73 of the Finance Act, 1994 is sustainable in law; (c ) The invocation of extended period for demand of Service Tax is justified as the appellants had suppressed facts. Therefore, the demand for Service Tax is not barred by time. (d) The appellants are liable to pay interest on the delayed payment of service tax at appropriate rates as provided for under Section 75 of the Finance Act,1994; (e) The appellants are liable to pay penalties under Sections 75A, 76 and 77 of the Finance Act, 1994. (f) In the circumstances of the case, penalty under Section 78 is not warranted. Appeals No. ST/07 and 10/2010 As there is a difference of opinion between 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 W....
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....mber (J) and, to the extent felt necessary in recording distinguishment, by Hon'ble Member (T). Briefly, the appellants are manufacturers of personal computers and use the products of M/s Intel Corporation and M/s Microsoft Corporation for such manufacture. A specified percentage of the net monthly off-take from these two suppliers are accrued in a separate fund from which appellants are entitled to some reimbursement of costs of publicity and advertisement subject to inclusion of pre-approved logos of both M/s Intel Corporation and M/s Microsoft Corporation in the publicity copy or material. The case of Revenue is that these displays are for a consideration and the said consideration is taxable under section 65(105)(zzb) of Finance Act, 1994 for having rendered 'business auxiliary service' within the meaning of section 65(19)(i) of Finance Act, 1994. M/s Datamini Technologies (India) Ltd and M/s Zenith Computers Ltd were determined as being liable to tax of Rs. 1,81,84,526/- and Rs. 67,80,664/- respectively for the period from 1^st July 2003 to 31^st August 2006 and from 11^th July 2003 to 28^th February 2007. 24. I must confess to being confronted with a predicament in resolvi....
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....ny, rendered by a unit in a special economic zone has, necessarily, to be ascertained within the scope and meaning of services in the Special Economic Zones Act, 2005. I do not dilate further on this claim of the appellant that has been disposed off against them because such a determination does not lie within the scope of the reference. 26. On the issue of limitation, Learned Counsel for appellants have drawn my attention to the finding in the order of Hon'ble Member (T) that the circumstances do not warrant imposition of penalty under section 78 of Finance Act, 1994. However, Member (T) while setting aside the penalty imposed under section 78 of the impugned order which has in: '04.19 Now I deal with the issue of limitation. The Noticees have contended that extended period for issue of the SCN could not have been invoked against them as they had acted in a bona fide manner and no evidence has been presented in the SCN that the omission to pay service tax was intentional in nature. It is observed that Noticees are managed 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 ....
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....g that the appellants were promoting the sale of goods of client, that appellants are in the business of manufacture using inputs obtained from M/s Intel Corporation and M/s Microsoft Corporation which, as per the decision of the Tribunal in Charanjit Singh Khanuja v. Commissioner of Service Tax Indore & others [2016 (41) STR 213 (Tri-Del)], is beyond the ambit of 'business auxiliary service', that the services, if any, are rendered to overseas entities and hence not taxable and that a difference of opinion is a clear indication that appellants also entertained bona fide belief that the transaction were not liable to tax. Learned Authorized Representative reiterated the contents of impugned order and urged concurrence with findings of Hon'ble Member (T). Referring to paragraph 4.1 and 4.2 of circular no. 334/1/2010-TRU dated 26^th February 2010, Learned Authorized Representative also submitted that the legislative intent to subject promotion of specific product as 'business auxiliary service' to tax is evident. 29. Both the Hon'ble Members have cited elaborately from the show cause notice to support their respective findings; Hon'ble Member (T) has come to the conclusion that th....
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....f bifurcation of earlier entry inasmuch as the earlier entry relating to advertisement remains unchanged without any change in the tax rate. As such, the introduction of new tariff entry would imply that the coverage in the new tariff for the purposes of tax was out of the scope of the earlier entry. It was so held in the case of Glaxo-smithkline Pharmaceuticals Limited v. CCE, Mumbai-IV reported in 2006 (3) S.T.R. 711 (Tri.) = 2005 (188) E.L.T. 171 (Tri.-Mum.) as also in the case of M/s. Zee Telefilm and M/s. Star India Private Limited v. CCE, Mumbai reported in 2006 (4) S.T.R. 349 (T) = 2006-TIOL-945 CESTAT (Mum.). If it is held that the activities of sponsorship and sale of space were covered under the earlier heading of advertising agency, the same would lead to redundancy of new legislation and would defeat legislative intent".' 30. Learned Counsel for appellants, on the other hand, relies upon '103. There can hardly be any quarrel about the proposition that introduction of specific entry does not mean that the subject covered by the specific 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....
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....ice or goods without altering taxability for rendering 'business auxiliary service.' With the decision of the Hon'ble Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh [2004 (178) ELT 22 (SC)], products of M/s Microsoft Corporation are also goods and hence the relevant activity does not have to be related to service. We need not concern ourselves with all the specific activities enumerated in section 65(19) and may restrict ourselves to that of 'promotion or marketing or sale of goods produced or provided by or belonging to the client'. 32. A key element in the definition of 'business auxiliary service' are the goods in relation to which service is rendered. The goods are to be produced or provided by or belonging to the client. There is no dispute that the goods supplied by M/s Intel Corporation and M/s Microsoft Corporation are bought by appellants thus ruling out an allegation that service is rendered by appellants in relation to these goods. Neither do the facts hold that goods are provided by M/s Intel Corporation or M/s Microsoft Corporation to the appellant for rendering of services. 33. Appellants use the products of M/s Intel Corporation and M/s M....
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....rtion of the cost of advertising and publicity conducted upon inclusion of the logos of the two entities in the advertising and publicity material of the appellants. The reimbursements are drawn from a fund created out of a contribution of the two entities that is directly linked to purchases effected in the past by appellant. There is no connect between the source of contribution for the publicity campaign and the outcome of the publicity campaign. 36. A question that arises is whether the two supplies benefit in any manner from the inclusion of their logos in the advertisement and publicity material deployed by the appellants. In scale and reputation, appellants are incomparable with the two global giants. It is difficult to conceive that the products of these two entities will find additional acceptability in the market owing to the inclusion of their respective logos. The products themselves are amenable to utilization only by computer manufacturers and the publicity, if any, among the potential customers of the two appellants is unlikely to derive any economic benefits to the supplier. 37. On the contrary, the products of the appellant are likely to find greater acceptan....