2009 (3) TMI 133

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.... Rs. 2,164 Total Rs. 9,45,923 (with interest) Penalty Rs. 100 per day up to 18-4-06; Rs. 200 per day from 18-4-06 or 2 per cent under section 76; Rs. 1,000 under section 77 and Rs. 2 crores under section 78 of the Act. 2. Filth Avenue Windmill Pvt. Ltd. BAS rendered to Benetton, Italy and to Indian vendors (15-3-2005 to 18-4-2006 & 19-4-2006 to 30-9-2006) BAS rendered to vendors (9-7-04 to 18-4-06) BAS received from commission agents outside India (9-7-2004 to 31-3-2005 1-4-2005 to 31-3-2006) Service Tax + Edn. Cess Rs. 33,53,490 + Rs. 67,070 Rs. 32,33,261 + Rs. 64,665   Rs. 8,48,078 + Rs. 16,962   Total Rs. 75,83,526 (with interest)   Rs. 1,83,644 + Rs. 3,673 Rs. 11,58,416 + Rs. 23,168 Total Rs. 13,68,901 (with interest) Penalty Rs. 100 per day up to 18-4-06; Rs. 200 per day from 18-4-06 or 2 per cent under section 76; Rs. 1,000 under section 77 and Rs. 1 crore under section 78 of the Act. Both the appellants were engaged in providing services found to fall under Business Auxiliary Service (BAS) in the impugned order to two separate companies located abroad (hereafter, co....

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....o vendors and ensured payments by Benetton to the local vendors. For rendering the abovesaid services, FAWPL received from the vendors, commission at the rate of 5 per cent of FOB value of the goods exported. (c) FAWPL utilized the services of certain foreign agents for rendering marketing services on behalf of FAWPL and paid them commission in convertible foreign exchange. 3. In the appeal before us, the appellants submit that as per the show-cause notices issued to them, the transactions undertaken by both of them in relation to vendors and, in the case of FA, also to the company, were described as follows: "The appellants rendered the services such as evaluation of prospective customers for the companies, processing of purchase orders, customer management, processing of transactions, information and tracking of delivery schedules, operational assistance for marketing formulation of customer service and pricing policies, managing distribution and logistics." These fell under the category BAS of clause (19) of section 65 to the Act. 3.1 FA & FAWPL had rendered services to companies as described in the show-cause notices; the liaisoning work they undertook with the vend....

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....treating the recipients of such service in India as providers of the service from 18-4-2006 with the enactment of section 66A vide Finance Act, 2006. In support of this claim appellants rely on the judgment of the High Court of Bombay in the case of Indian National Shipowners Association v. Union of India [2009] 18 STT 212. Relying on the judgment of the Apex Court in Ishikawajma-Harima Heavy Industries Ltd. v. DIT [2007] 158 Taxman 259 the appellants submit that no tax could be levied by the respondents on services rendered outside India. In the judgment cited, the Supreme Court had held that the Indian taxing authority had no right to tax a transaction undertaken outside India even though such services were used in India. CBEC had clarified vide Circular F. No.36/4/2001, dated 8-10-2001 that the Finance Act, 1994 ('the Act') did not extend to territories outside India. 4. We have heard both sides. We find that both the appellants rendered services of the same description to the vendors, and in the case of FAWPL, also to the company i.e., Benetton. FA rendered services to DSI by identifying the vendors in India for procurement and supply of garments. They coordinated with vendo....

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....evant to the instant case reads as follows: '(19) 'business auxiliary service' means 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 Explanation- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, 'service in relation to promotion or marketing of service provided by the client' includes any service provided in relation to promotion or marketing of games of chance, organised, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo; (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, 'inputs' means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of, the client; (vi) provision of service on behalf of the client; or (vii) a servi....

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....production of goods and provision of services. VAT was a consumption tax borne by the client. Service tax was a destination based consumption tax. The tax fell on the consumer of services. It would, logically, be leviable only on services provided within the country. 4.3 As clarified by the Bombay High Court in the case of Indian National Shipowners Association (supra) it was only after enactment of section 66A of the Act on 18-4-2006 that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents. The legal position in this regard was clarified by the Hon'ble High Court as follows: "... It appears that it is first time when the Act was amended and section 66A was inserted by Finance Act, 2006 with effect from 18-4-2006, the respondents got legal authority to levy service tax on the recipients of the taxable service. Now, because of the enactment of section 66A, a person who is resident in India or business in India becomes liable to be levied service tax when he receives service outside India from a person who is non-resident or is from outside India. Before enactment of section 66A it is apparent that there was no aut....