TaxTMI 
TaxTMI 
2024 (8) TMI 1212
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....ing process and facilities available in the Indian customers' unit and the report is submitted to the parent company. Since the service is covered under the category of 'Technical Inspection and Certification Service', the appellant is liable to pay Service Tax and also ruling that the services provided by the appellant cannot be considered as export of services as per Rule 3(1)(ii) of Export of Service Rules, 2005 as the inspection is performed in India. Accordingly for the period 01.10.2006 to 30.09.2007, show-cause notice dated 18.04.2009 was issued demanding service amount of Rs.92,42,719/- invoking the extended period of limitation. Another, show-cause notice dated 21.04.2009 for the period October 2007 to September 2008 was issued for an amount of Rs.96,80,837/-. Both the show-cause notices were adjudicated by the Commissioner vide Order-in-Original No.9/2010 dated 28.04.2010 which is the impugned order. The Commissioner referring to the reply to the show-cause notice submitted by the appellant which reads as: "UL Inc is engaged in technical inspection and testing services and has entered into agreement with various customers across the world. As a part of the agreem....
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....the backend processes involved in services rendered by UL USA are outsourced/sub-contracted to its group companies and these group companies happened to be involved in backend processing, do not form part of these business transactions in law. It is submitted that the backend processing is purely technical in nature and the appellant merely works on information provided by the parent company. It is submitted that the appellant also independently renders services in the nature of technical inspection and certification to its Indian customers and in all these cases, they discharge applicable Service Tax under that category. The services later categorised as technical inspection and certification rendered by the appellant in the impugned order is only a backend data processing reviewing done by the appellant and the same is passed on to their parent company who then uses the same for certification. Referring to the definition as per section 65(108), it is submitted that none of these ingredients are reflected inasmuch as they are only providing data to the parent company and there is no expressed agreement between the appellant and the end customers nor there is any flow of considerat....
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.... it cannot be considered as Export of Service. 6. Heard both sides. There are two show-cause notices whose period of dispute ranges from October 2006 to September 2008. The first issue to be decided is whether the services rendered by the appellant fall 'Technical Inspection and Certification Services' or as 'Business Auxiliary Services'. The second issue is whether irrespective of classification these services can be considered as export of services under 'Export of Service Rules, 2005'. Finally, whether facts were misrepresented/suppressed so as to invoke extended period and impose penalty under various Sections of the Finance Act, 1994. 6.1 The appellant is the Indian subsidiary of UL, USA, who requests the appellant to carry out the inspection of manufacturing process and facilities available in the Indian customers unit. As rightly observed by the Commissioner, the appellant had admitted to the fact that the UL Inc, USA who is engaged in technical inspection and testing services and has entered into an agreement with various customers across the world. The subsidiary companies which are located in India the services are performed on behalf of the parent company by a UL I....
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....s; or vii. A service incidental or auxiliary to any activity specified in sub-clauses Admittedly, the services rendered by the appellant are undertaken on behalf of the parent company and therefore, rightly classifiable under Business Auxiliary Service as claimed by the appellant. Moreover, Technical Inspection and Certification Service is complete only when the certificate is issued and in the instant case, admittedly, the certificate is issued by the parent company. Therefore, the question of classifying the same under 'Technical Inspection and Certification Service' is ruled out. 7. The second issue is whether the above service can be considered as export of service as per Export of Service Rules, 2005, which reads as: Export of Services Rules, 2005 - First Amendment of 2006 In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Export of Services Rules, 2005, namely:- (1) These rules may be called the Export of Services (Amendment) Rules, 2006. (2) They shall come into force on the date of their publication in ....
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....ng conditions are 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. Explanation. - For the purposes of this rule "India" includes the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs numbers S.O. 429(E), dated the 18th July, 1986 and S.O. 643(E), dated the 19th September 1996.". [Notification No. 13/2006-S.T., dated 19-4-2006] (Emphasis Supplied) 7.1 As admitted by the Department though the appellant conducts inspection and testing in India, the inspection reports are sent to their parent company at USA based on these reports, a certification is issued by the parent company. Therefore, part of the services is completed in India and partly outside India. In the case of Commissioner of Service Tax, Ahmedabad vs. B.A. Research India Ltd.: 2010 (18) S.T.R. 439 (Tri.-Ahmd.), the main contention of the Revenue was that the clinical report of the testing and analysi....
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....rformance of the service is not complete until the testing and analysis report is delivered to its client. In the present case, when such reports were delivered to the clients outside India it amounts to taxable service partly performed outside India. The performance of testing and analysing has no value unless and until it is delivered to its client and the service is to be complete when such report is delivered to its client. Thus, delivery of report to its client is an essential part of the service report was delivered outside India and same was used outside India. This is not the disputed fact. We hold that the respondent satisfied the conditions of Rule 3(2) and accordingly the respondents are eligible for the exemption under Notification No. 11/2007-S.T. dated 1-3-2007. We do not find any force in the argument made by the learned DR. With this observation, the impugned order is upheld and the appeal filed by the Revenue is rejected". 7.2 In the present case, admittedly the inspection reports are clearly issued by the parent company of the appellant and there is no dispute that the inspection conducted by the appellant is of no value unless an inspection report is issued to....
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.... said to be covered by orders in these two cases. To our mind, once the Hon'ble Supreme Court has taken the view that Service Tax is a value added tax which in turn is destination-based consumption tax in the sense that it taxes non-commercial activities and is not a charge on the business, but on the consumer, then, it is leviable only on services provided within the country. It is this finding and conclusion of the Hon'ble Supreme Court which has been applied by the Tribunal in the facts and circumstances of the present case." 7.3 Similarly, in the case of M/s. Sun Micro systems (I) Pvt. Ltd. 2023 (9) TMI 647-CESTAT, Bangalore, this Tribunal clearly held that : "The aforesaid principles laid down by the Larger Bench are applicable to the facts of the present case, which are similar in nature, in as much as, the activity undertaken by the appellant is canvassing for the products and services of Sun Singapore which is ultimately used by Sun Singapore for further business. There is no agreement between the prospective customers of Sun Singapore in India and the appellant. The appellant has entered into an agreement only with Sun Singapore. It is on the request and direct....