By TIOL News Service

MUMBAI, NOV 13, 2014: THE appellant is providing services which are taxable under the category of Business Auxiliary Service. As per agreement of M/s. Wilden California, M/s. Blue Star Ltd. and IIT Ind. Singapore and M/s. Yxlon, Humberg and M/s. Techcomp Ltd. and M/s. SolartronMobrey Ltd., the appellant are operating as distributor for sales and after sales service of Hitachi Analytical product. Initially the appellant paid service tax but thereafter realised that they are covered by the Export of Services Rules, 2005. And so, they claimed refund of the ST paid of Rs.50.40 lakhs during the period August 2005 to July 2006.

On the ground that the services rendered by the appellant does not fall under the Export of Services Rules, 2005 the claims were rejected.

Before the CESTAT the appellant inter alia submitted that the foreign clients appointed them to provide repair, maintenance service during the period of warranty on behalf of their clients to the buyers in India; that as the service provided by the appellant is in relation to trading activity, maintenance and repairs and the recipient of the service is located outside India, therefore, they are squarely covered by the Export of Services Rules, 2005 as amended Notification 13/06-ST dated 19.04.2006 and they are not liable to pay service tax.

The AR reiterated that the activity of the appellant does not qualify as Export of Services and, therefore, they are not entitled for the refund claim.

The Bench observed -

++ The appellant is a Distributor/agent of their foreign clients and procuring orders for supply of equipment by the foreign supplier. The appellant has no connection with the buyers in India. In fact he is identifying the buyers for the foreign clients, and the foreign clients are selling equipment to the Indian buyers, on principal to principal basis. We further find that as the equipment are having warranty and the foreign client have to provide certain services to Indian buyers and for providing that service, the appellants are providing service to Indian buyer on behalf of the foreign clients. In these circumstances, the recipient of the service is located outside India who used the services of the appellant to provide service to their buyers. A similar case came up before this Tribunal in Paul Merchants Ltd. - 2012-TIOL-1877-CESTAT-DEL wherein it is held that service provided by the Agents has to be treated as export of service. The Bombay High Court in SGS India P. Ltd. - 2014-TIOL-580-HC-MUM-ST also upheld the Tribunal decision - 2011-TIOL-666-CESTAT-MUM where a similar stand was taken.

++ In this case also, the appellant are providing the service of maintenance of equipment on behalf of their foreign clients to Indian buyers. They have provided the service on behalf of their foreign clients. We further find that during the warranty period, the repairs and maintenance service was to be provided by the foreign supplier and the appellant acted on behalf of the foreign supplier only. It is an admitted fact that the Indian buyer has not paid any amount towards the service provided by the appellant to the appellant during warranty period whereas the appellant who provided the service to Indian buyers has paid the service tax on maintenance service after the warranty period.

++ We have no hesitation to hold that as the appellant has provided the service of procuring purchase orders for their foreign clients and providing maintenance service to the Indian buyers during the warranty period on behalf of their foreign clients on the instructions of foreign clients, the same are covered by Rule 3(3) of Export of Services Rules,2005. Therefore, the appellant are not required to pay service tax during the impugned period for their activity. Accordingly, they are entitled for refund claim.

The appeal was allowed with consequential relief.

(See 2014-TIOL-2257-CESTAT-MUM)