By TIOL News Service

MUMBAI, JULY 31, 2017: THIS appeal is filed against confirmation of demand of service tax and imposition of penalty.

The appellant submits that they are engaged in promotion and marketing of spares and accessories of Yamazaki Mazak Trading Corporation, Japan (YMTCJ) and they have received commission from YMTCJ; that such contract is also entered with Yamazaki Mazak Singapore Pte. Ltd. (YMSPL); that these services qualify as export of service and, therefore, no tax can be demanded on these services.Reliance is placed on the Circular No. 111/5/2009 dated 24-2-2009 and 141/10/2011 -TRU dated 13-5-2011 and decisions in Bobst India Pvt Ltd. - 2015-TIOL-2105-CESTAT-MUM , Microsoft Corporation (I) (P) Ltd - 2014-TIOL-1964-CESTAT-DEL . As regards bonafide belief and the demand being hit by limitation, case laws cited are National Engineering Industries Ltd. - 2011-TIOL-1060-CESTAT-DEL and Pam Pharma& Allied Machinery Co. P. Ltd - 2014-TIOL-2342-CESTAT-MUM .

The AR relied on the decisions in Life Care Medical Systems - 2012-TIOL-993-CESTAT-MUM and Microsoft Corporation (India) Pvt. Ltd - 2009-TIOL-1325-CESTAT-DEL in support of the Revenue stand.

The Bench liberally extracted the provisions of the agreement entered into by the appellant with YMTCJ and observed that it was apparent that the appellants were involved in various activities in India on behalf of the foreign principal for a consideration.

After reproducing the contents of the Board Circular dated 24.02.2009, the CESTAT noted that the Indian agent who undertakes marketing in India of goods of foreign seller and receives commission for the service in convertible foreign exchange would qualify for the benefit of export of service . And that the Circular No. 141/10/2011 -TRU dated 13-5-2011 further elaborated the meaning of the term ‘accrual of benefit', ‘use outside India'.

The Bench, therefore, held –

"…It is seen that the impugned order relies on the circular dated 13-5-2011 to interpret phrase "use outside India" to ascertain if the said services qualifies as export service. The circular dated 24-2-2009 simply prescribed that the said service qualifies as exports if recipient is located outside India. In this circumstances appellant's claimed that they had bonafide belief on the strength of these circular dated 24-2-2009 cannot be dislodged. Circular dated 24-2-2009 clearly held that in the case of Business auxiliary services provided by Indian Agent who undertakes marketing in India of goods of foreign seller and received the commission for service in convertible foreign exchange and where recipient is located out side India the same would qualify as export of service. In view of the above extended period of limitation cannot be invoked in the instant case."

On the merits of the case, the Tribunal adverted to the decision in Microsoft Corporation (India) Pvt. Ltd - 2014-TIOL-1964-CESTAT-DEL and held that the services provided by the appellant qualify as export of service.

Consequently, the appeal was allowed.

(See 2017-TIOL-2674-CESTAT-MUM)