Assessee procures orders from Indian Cos & pass them to foreign manufacturers with whom they have agreement for receiving commission on orders - act is Export of service & does not invite ST liability: HC
By TIOL News Service
MUMBAI, SEPT 18, 2017: ON examination of records, the CERA noticed that the assessee 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 providing services of promotion or marketing of goods of the foreign seller.
SCN came to be issued and the CST, Mumbai confirmed a service tax liability of Rs.5,32,96,615/- with interest and penalties.
In the matter of the stay application filed, the CESTAT, Mumbai granted waiver from making any pre-deposit.In its order - 2014-TIOL-2649-CESTAT-MUM the Tribunal observed -
| "7. We have gone through the various agreements and we find that the applicants are only negotiating business transaction with the foreign suppliers and also advertising the products of the foreign suppliers. Thereafter the customers place orders with the foreign supplier directly supply the goods to the customers. In this prima facie of the matter and in view of the Export of Services Rules, 2005 the applicants have made out a case for waiver of the pre-deposit. The pre-deposit of the dues is waived for hearing the appeal." |
While allowing the appeal, the CESTAT in its order dated 7 January 2015 [ 2015-TIOL-252-CESTAT-MUM ] held -
| ST - BAS - Appellant is procuring orders from the Indian Companies and passing on to various overseas manufacturers with whom they have an agreement for receiving commission on materialization of the orders - activity though culminates in supplies to Indian Company, cannot be considered as services provided in India - Appeal allowed: CESTAT |
The following case laws were relied upon by the Tribunal -
Vodafone Essar Cellular Ltd., Vs. CCE, Pune - 2013-TIOL-566-CESTAT-MUM
Paul Merchants Ltd., Vs. CCE, Chandigarh - 2012-TIOL-1877-CESTAT-DEL
Microsoft Corporation Indian Private Ltd., Vs. CST, New Delhi - 2011-TIOL-1508-CESTAT-DEL
Gap International Sourcing (India) Pvt. Ltd., Vs. CST- 2014-TIOL-465-CESTAT-DEL
CST, Mumbai-III Vs. SGS India Pvt. Ltd. - 2014-TIOL-580-HC-MUM-ST
Revenue is thoroughly aggrieved by this order and is, therefore, in appeal before the Bombay High Court.
The appeal seeks to raise the following substantial questions of law -
(a) Whether the services provided by the Respondent herein, in accordance with various contracts entered into with overseas manufacturers, is classifiable under "Business Auxiliary Services" as defined under section 65(105)(zzb) of the Finance Act, 1994 and if so, whether the said services provided are to be treated as export of services or not?
(b) Whether the CESTAT was justified in passing the impugned order dated 07-01-2015 relying upon several judgments of the tribunal which are not applicable in the facts and circumstances of the present case?"
The High Court extracted the findings given by the CESTAT in paragraphs 8 to 11 of its order and observed that there was no case made out to interfere with the judgments/findings of which are based upon the facts of law.
The respondent also relied on the judgment in Commissioner of Service Tax, Mumbai-II Vs. SGS India Pvt. Ltd. - 2014-TIOL-580-HC-MUM-ST to support the order of the Tribunal.
The High Court noted that the Division Bench in Commissioner of Service Tax, Mumbai Vs. Maersk India Pvt. Ltd. - 2015-TIOL-516-HC-MUM-ST held that "the observations reported in - 2014-TIOL-580-HC-MUM-ST (supra) aptly apply in the present case. The situation shows that the consideration by the Tribunal about service by the respondent-assessee to a foreign recipient being outside the purview of the collection of service tax, can seldom be flawed, the question sought to be raised in the appeal as such stand answered accordingly. The appeal fails and stands dismissed with no order as to costs."
Concluding that there is no case made out by the appellant, the Revenue Appeal was dismissed.
(See 2017-TIOL-1906-HC-MUM-ST)
