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ST - Appellant conducts market research on behalf of overseas customers - for sharing findings, gets paid in forex - services have to be considered as export of service and would not be liable to Service Tax - Appeal allowed: CESTAT

By TIOL News Service

MUMBAI, NOV 08, 2013: AGAINST the order passed by the Commissioner of Service Tax, Mumbai, both the assessee and the Revenue are in appeal before the CESTAT. Whereas the appellant is in appeal against the confirmation of the demand of Rs.11,58,043/- the Revenue is in appeal against the dropping of the penalty under Section 78 of the Finance Act, 1994.

The appellants are engaged in providing market research. They are conducting the market research on behalf of certain customers situated abroad. After conducting the market research, the results of the same are communicated to their clients abroad and consideration for the said service has been received in convertible foreign exchange. The period under dispute is from 1.3.2003 to 19.11.2003. There is no dispute on the fact that the appellant is providing market research service which is liable to tax. Prior to 1.3.2003, they were availing the benefit of Notification No.6/99-ST dated 9.4.1999 and from 20.11.2003 onwards, they were availing the benefit of Notification 21/2003-ST dated 20.11.2003. The dispute is only for the intervening period. The fact that the results of such market survey were being sent abroad and the amount was being received under the convertible foreign exchange is also not disputed. The appellant relies on the Board Circular No.56/5/2003-ST dated 25.4.2003 to contend that the service is being exported and service tax is destination or consumption based tax and, therefore, the services have been exported out of India and hence no tax is leviable.

It is the case of the Revenue that the whole of the service has been provided in India and just because the results of the service have been communicated abroad, it is not implied that the service has been provided abroad; inasmuch as the taxing event is not the consumption of service but the provision of service and since the service has been provided in India, they are liable to pay service tax. In the matter of penalty u/s 78 of FA, 1994, it is argued that the assessee was fully aware of the fact that Notification 6/99-ST dated 9.4.1999 was rescinded on 1.3.2003 and it was their duty to pay the tax thereafter.

The Bench extracted the Board Circular dated 25.04.2003 and observed -

"…In view of the above circular issued by the Board, the services rendered by the appellant have to be considered as export of service and would not be liable to service tax. We also find that this tribunal has taken similar view in the case of SGS India Pvt. Ltd. vs. CST, Mumbai reported in - (2011-TIOL-666-CESTAT-MUM). The other issue involved in the said appeal is relating to credit of Rs. 41,732/-. The appellant is paying service tax from Mumbai main office in respect of all the branch offices and, therefore, we do not find anything wrong in taking credit just because the invoices are in the name of branch offices. The appeal on this count is allowed. Since we have allowed the appeal on merits, the appeal filed by the revenue is infructuous and is, therefore, dismissed. In the result, the appeal filed by the appellant M/s. TAM Media Research Pvt. Ltd. is allowed and that of the Revenue is dismissed.

(See 2013-TIOL-1667-CESTAT-MUM)


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