ST - Appellant procures orders from Indian Cos and passes on to overseas manufacturers with whom they have agreement for receiving commission - activity though culminates in supplies to Indian Company, cannot be considered as services provided in India - Appeal allowed: CESTAT
By TIOL News Service
MUMBAI, FEB 04, 2015: THE CERA audit party noticed that the assessee/appellant had obtained orders from various companies and passed them on to the foreign company; on receiving such orders, the foreign companies deliver the goods to Indian companies and paid a commission to the appellant which was in foreign currency.
The audit party entertained a view that the appellant is liable to discharge service tax under "Business Auxiliary Services" (BAS) on such amount received by them as commission from foreign parties as they were promoting, gathering market information, which would fall under the category of promotion or marketing of goods/services.
SCN came to be issued and the CST, Mumbai confirmed a service tax liability of Rs.5,32,96,615/- with interest and penalties.
The CESTAT had granted waiver from making any pre-deposit and ordered a stay from recovery by inter alia citing the Export of Services Rules, 2005. We reported this order as - 2014-TIOL-2649-CESTAT-MUM.
The appeal was heard recently.
The appellant submitted that the issue is no more res integra and has been decided in favour in the following cases:
a) Vodafone Essar Cellular Ltd., Vs. CCE, Pune – 2013-TIOL-566-CESTAT-MUM
b) Paul Merchants Ltd., Vs. CCE, Chandigarh – 2012-TIOL-1877-CESTAT-DEL
c) Microsoft Corporation Indian Private Ltd., Vs. CST, New Delhi – 2011-TIOL-1508-CESTAT-DEL
d) Gap International Sourcing (India) Pvt. Ltd., Vs. CST- 2014-TIOL-465-CESTAT-DEL
e) CST, Mumbai-III Vs. SGS India Pvt. Ltd. – 2014-TIOL-580-HC-MUM-ST
f) Blue Star Ltd., Vs. CST, - 2013-TIOL-566-CESTAT-MUM
It is his submission that in view of the above, the impugned order be set aside.
The AR submitted that it is not disputed that all the activities undertaken and services provided are in relation to the sale of goods in India and the consideration has been received only for the services provided in India in respect of sale of goods in India; that the appellant was not only procuring the orders but they are also assembling and organizing and collects receivables from the clients. Inasmuch as the service tax has been correctly demanded, the AR said.
The appellant in his rejoinder said that the observations of the adjudicating authority that they support assembling and organizing of imports and collects receivables from the client is factually incorrect.
The CESTAT agreed with the submission of the appellant that they did not engage in assembling and organizing of the imports and observed –
++ His (appellants') duty as is ascertained from the agreement, indicates that he is supposed to procure the orders and pass it on to the overseas manufacturers; on receipt of such orders, the overseas manufacturers executes the same on his own and the consideration for such supplies is directly paid to the overseas manufacturers by the person who has placed the order. The entire transaction in our considered opinion seems to be of only procurement of orders and the rendering of services, if any, by the appellant is towards the foreign or overseas manufacturers. In our view, this activity though culminates in supplies to Indian Company, cannot be considered as services provided in India. We are fortified in our view by the ratio of the Tribunal in the case of Vodafone Essar Cellular Ltd. (supra).
Holding that the the decisions in Paul Merchants Ltd. case, Microsoft Corporation (I) Pvt. Ltd., GAP International Sourcing (India) Pvt. Ltd. cited by the appellant apply in full force to the case on hand, the Bench set aside the order passed by CST, Mumbai as being unsustainable.
The appeal was allowed.
(See 2015-TIOL-252-CESTAT-MUM)
