TaxTMI 
TaxTMI 
2023 (8) TMI 246
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....med by the appellant from payment of service tax on 'export of service' by treating the service rendered by the appellant as 'business auxiliary service' [BAS] defined under section 65(105)(zzb) of the Finance Act 1994 [the Finance Act] to an entity situated in India. The show cause notice relied upon rule 3(2) of the Export of Service Rules 2005 [the 2005 Export Rules]. 3. The main contention advanced by the appellant before the Commissioner (Appeals) was that the 2005 Export Rules would not be applicable for the period of dispute from 01.07.2012 to 31.03.2015 as they were superseded by the Place of Provision of Services Rules 2012 [the 2012 Rules], which came into effect from 01.07.2012 and that the services provided by the appellant would be 'export of service', both under the 2012 Rules and the 2015 Export Rules. 4. To appreciate this contention, it would be appropriate to refer to the show cause notice dated 03.09.2014 and the relevant portions are reproduced below: "6. Vide letter dated 04.08.2014 (RUD-3) the assessee intimated that being Export of Service, hence the service is exempt and no service tax have been paid, however, provided the information regardin....
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....Appellant have rendered market promotion service to its foreign principal identifying potential consumers in India and resultantly made themselves liable for service tax liability under section 65(105)(zzb) of the act. In the present proceedings it is observed that the party took the activities of exploring market in India on behalf of foreign principal to serve the target group of customers in this defined territory. 10. Due to the efforts of the assessee the foreign based principle could sell his products in India. There was no export of service at all made by the party. Therefore, by no innovative argument, the service provided in India can be converted into export of service. xxxxxxxxxx 13. I observe that the party undertook market promotion in the territory of India for sale of the products of their foreign based principal. As the service provided by the party are category-III under Export of service Rule, 2005 the condition that the services provided by them had a foreign location have to be satisfied by them by proving that the services were provided abroad and not in India. However, I observe that the overall activities of the party as mentioned i....
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.... India, they had been correctly classified to be taxable under BAS. The relevant portion of the order is as follows: "Here it is important to point out that the appellant is dealing in overseas products like surface science test equipments, environmental analysis kits and equipments, chemical engineering equipment, life sciences and microbiology equipments, laboratory equipments etc. The impugned order clearly says that due to the efforts of the appellant the foreign based principals could sell their products in India which means that the appellant are selling these precuts on behalf of the foreign principal by exploring market, identifying consumers and therefore the activities are such that the flow of these services is not flowing abroad for consumption. Accordingly, the respondent cannot be termed as a provider of mere advisory services like a commission agent or consignment agent etc. so as to be covered under intermediary services. I therefore, do not find myself in agreement with the contention of the appellant particularly when their grounds of Appeal, the appellant has not offered any elaborate discussion or any agreement to establishes them as an intermediary. As....
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....unal in Wall Street Finance Ltd. vs. Commissioner of Service Tax, Mumbai [2015 (37) S.T.R. 642 (Tri.-Mumbai)] was not followed by the Commissioner (Appeals) as according to the Commissioner (Appeals) the order of the Tribunal had not attained finality for the reason "there is nothing on record from where it can be gathered that the above cestat order had attained finality". The decision of the Tribunal in Microsoft Corporation (l)(P) Ltd. vs. Commissioner of Service Tax, New Delhi [2014 (36) S.T.R. 766 (Tri.-Del.)] was also not followed by the Commissioner (Appeals) for the reason that the Civil Appeal filed by the department against the said order had been admitted. 11. The Commissioner (Appeals) ultimately held: "Accordingly, keeping in mind that during the period under dispute the condition with regard to the words 'the recipient of service is located outside India' was mandatorily required to be followed, the impugned Order-in-Original has correctly held that the services provided by the appellants are not 'export' as the performance, use and consumption of services happen simultaneously and these all happen in India only owing to which the recipient cannot be terme....
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....ules have been superseded. 17. Since "export service" means a service which is provided as per rule 6A of the 1994 Rules, the said rule is reproduced: "6A. Export of services.- (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory, (b) the recipient of service is located outside India, (c) the service is not a service specified in the section 66D of the Act, (d) the place of provision of the service is outside India, (e) the payment for such service has been received by the provider of service in convertible foreign exchange, and (f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act (2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditi....
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...., environmental analysis kits and equipments, chemical engineering equipments, life sciences and microbiology equipments and laboratory equipments of the foreign supplier in India. The appellant explores the market, identifies the customers, and informs the foreign supplier regarding the potential customers situated in India. It is the foreign supplier who ultimately supplies the goods to the Indian customers. For the services rendered by the appellant to the foreign supplier, the appellant receives service charges called as commission charges in convertible foreign exchange. The appellant has treated this service as 'export of service' and, therefore, has not paid any service tax, since the services were rendered to a foreign supplier and the service charges were received in convertible foreign exchange. 24. The Commissioner (Appeals) has, however, concluded that since the goods were ultimately sold to customers in India, the appellant was providing services in India and, therefore, the services provided would not be export of service. 25. The Commissioner (Appeals) completely failed to appreciate that so far as the appellant is concerned it was merely providing services to ....
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.... goods to the Indian customers. For the service provided by Arcelor India to the foreign entity i.e. Arcelor France, Arcelor India received commission in convertible foreign currency. The department believed that service tax was leviable on this commission received by Arcelor India since the services were performed and consumed in India and they would not qualify as export of service. This contention was repelled by the larger bench and it was observed that though the goods were being supplied to customers in India, the actual recipient of BAS provided by Arcelor India is Arcelor France. The relevant portions of the decision of the larger bench are reproduced below: "1. xxxxxxxxx. A prospective customer in India is either approached by Arcelor India or a prospective customer contacts Arcelor India regarding stainless steel requirement, but in either case the request is forwarded by Arcelor India to the foreign steel mills with the technical requirements of the Indian customer. Once the foreign mills and the Indian customer come to an understanding on the terms and conditions of supply, a written contract is executed between the Indian customer and the foreign mills or a pu....
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....ide India; and payment for such service provided outside India is received by the service provider in convertible foreign exchange. However, as the phrase 'delivered outside India' in rule 3(2)(a) did not provide clarity with respect to intangible services, this expression was replaced w.e.f. 01.03.2007 by 'is provided from India and used outside India'. The Circular dated 29.04.2009 issued by CBEC clarifies that the relevant factor is the location of the service receiver and not the place of performance and the phase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. The term 'used outside India', therefore, means that the service is provided to such a service recipient who is located outside India. It is the location of the service-recipient which determines where the service is used. The use of intangible services should be seen with respect to the location of the service recipient and not the place of performance. xxxxxxxxxxxx 47. Arcelor France and Arcelor India act as main agent and sub-agent for foreign mills and not as an agent or service provider for the customers in India. There is no contractua....
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....ecessary details of the customers in India to the foreign steel mills and, thereafter, the foreign steel mills and the Indian customers execute a contract for supply of the goods. The goods are directly supplied by the foreign steel mills to the Indian customers. Arcelor India also satisfies condition (b) of rule 3(2) as payments for such service have been received in convertible foreign exchange." (emphasis supplied) 45. Thus, irrespective of whether the 2005 Export Rules or the 2012 Rules are applicable, the appellant would render 'export of service' which was not taxable till 01.10.2014, whereafter it became taxable as the appellant became an intermediary. 46. Even otherwise, the extended period of limitation could not have been invoked in the facts and circumstances of the case. 47. The reason given by the Commissioner (Appeals) to sustain the invocation of the extended period of limitation is that the appellant could have sought clarification from the department, but no effort was made. This reason was not found to be a good reason by the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and ors. [W.P. (C) 7542/2018 decided on 06.04.2023] and th....
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....ee is guilty of suppression of facts to evade tax. ***** 41. In the facts of this case, the impugned show cause notice does not disclose any material that could suggest that MTNL had knowingly and with a deliberate intent to evade the service tax, which it was aware would be leviable, suppressed the fact of receipt of consideration for rendering any taxable service. On the contrary, the statements of the officials of MTNL, relied upon by the respondents, clearly indicate that they were under the belief that the receipt of compensation/financial support from the Government of India was not taxable. Absent any intention to evade tax, which may be evident from any material on record or from the conduct of an assessee, the extended period of limitation under the proviso to Section 73(1) of the Act is not applicable. The facts of the present case indicate that MTNL had made the receipt of compensation public by reflecting it in its final accounts as income. As stated above, merely because MTNL had not declared the receipt of compensation as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL's contention that the rece....