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ST - Commission received is for services provided by appellant to their foreign principal who have paid in convertible foreign exchange - appellant have exported services and are not liable to pay service tax: CESTAT

By TIOL News Service

ALLAHABAD, SEPT 20, 2016: A Service Tax demand of Rs.2,29,21,508/- was confirmed against the appellant along with interest and equivalent penalty.

The issue is whether services provided by the appellant as commission agent for sale of goods of its foreign principal M/s Barco Control Rooms GMBH, Germany on their behalf is to be treated as export of services under Rule 3 of Export of Services Rules, 2005 during the period01.04.2006 to 31.03.2011.

The appellant is negotiating with the prospective customers of Barco, Germany and procuring the orders from the customers in India. For this purpose, the appellant interacts and liaises with the customers in India by explaining the details of the product of Barco, Germany and ensures that the customers place purchase order on Barco, Germany. Thereafter, Barco, Germany exports the goods from Germany to the customers in India and raises the invoices directly on the customers. The appellant then raises the invoices for its commission on Barco, Germany. The commission is based on an agreed percentage of the value of goods sold and the same is paid by Barco, Germany in convertible foreign currency.

Before the CESTAT, the appellant submitted that the issue is no more res-integra and the same is covered in their favour by the C.B.E.C Circular No.111/5/2009/ST dated 24.02.2009 and also by the Tribunal ruling in Paul Merchant Ltd. -2012-TIOL-1877-CESTAT-DEL and Microsoft Corporation (I) (P) Ltd. - 2014-TIOL-1964-CESTAT-DEL.

The Bench observed that the issue is squarely covered by the precedent ruling of the Tribunal in the case of Microsoft Corporation (I) (P) Ltd. (supra). After adverting to and extracting the relevant portions of the C.B.E.C. Circular No.111/5/2009-, S.T. dated 24.02.2009, the Bench observed thus -

++ As per the law explained by the C.B.E.C. and the example quoted therein, it is explicit the services provided by the appellant is to their foreign principal who have paid for such services in convertible foreign exchange. Accordingly, we hold that appellant has satisfied both the conditions under the Rule 3 of Export of Services Rules of 2005. Accordingly, we hold that the appellant have exported the services in question and they are not liable to pay service tax under the Finance Act, 1994.

The impugned order was set aside and the appeal was allowed with consequential relief.

(See 2016-TIOL-2454-CESTAT-ALL)


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