Custom, Excise & Service Tax Tribunal
Lubrizol India Pvt. Ltd vs Commissioner Of Ce & St,(Ltu) on 21 July, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I Appeal No. ST/188/10-MUM (Arising out of Order-in-Appeal No. SB/01/LTU/MUM/2010 dated 19.01.2010 passed by Commissioner of Central Excise & Service tax, (Appeals), Mumbai) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) 1. Whether Press Reporters may be allowed to see :No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the :No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether Their Lordships wish to see the fair copy :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Lubrizol India Pvt. Ltd. Appellant
Vs.
Commissioner of CE & ST,(LTU) Respondent
Mumbai
Appearance:
Shri. H.G. Dharmadhidari, Advocate for appellant
Shri. R.K. Das, DC (AR) , for respondent
CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial)
Honble Mr. C.J.Mathew, Member (Technical)
Date of Hearing : 21/07/2015
Date of Decision : 21/07/2015
ORDER NO
Per: M.V. Ravindran:
1. This appeal is directed against order-in-appeal No. SB/01/LTU/Mum/2010 dated 19.01.2010.
2. The relevant facts that arise for consideration are ofter scrutiny of the records of appellant, it was observed that appellant was receiving commission on sale of goods of Lubrizol Corporation USA and the said commission was based on technology transfer agreement. It appeared that service tax liability arises on such amounts received as commission under the category of Business Auxiliary Services as defined under section 65 (19) of the finance act, 1994. A show cause notice was issued. Appellant contested the show cause notice on merits as well as on limitation. The adjudicating authority after following due process of law confirmed the demand raised for a period 1/7/2003-31.3.2007, interest thereof and also imposed penalties. Aggrieved by such an order, appellant preferred an appeal before the first appellate authority. The first appellate authority after granting an opportunity of personal hearing to the appellant and considering the submissions made at the time of personal hearing, concurred with the views of adjudicating authority and rejected the appeal.
3. Learned advocate appearing on the behalf of appellant would take us to the technology transfer agreement, show cause notice, order-in-original and the impugned order. It is his submission that appellant had received commission from Lubrizol Corporation USA for the products sold by them in India under the said agreement. It is his submission that appellant had not rendered any sales and customer service. It is his further submission that assuming the appellant had rendered the services in terms of agreement; the said services are not taxable as the amount is received in convertible foreign exchange. It is also his submission that the services rendered by the appellant is used by a company situated abroad and being a foreign based principal, these services would fall under the category of export of services. For this proposition, we relies upon the judgment of the Honorable High Court in the case of CST, Mumbai-II Vs. SGS India pvt. Ltd.-2014 (34) STR 554 (Bom.), judgment of the Tribunal to the case of Microsoft Corporation (I) (P) Ltd. vs. CST New Delhi 2014 (36) STR 766 (Tri.-Del.), CST Mumbai Vs. Vodafone India Ltd-2015 (37) STR 286(Tri.-Mum).
4. Learned departmental representative on the other hand relies upon the very same agreement and submits that appellant is providing after sale services to Lubrizol Corporation USA and he is paid for such services rendered by him. It is his submission that whether appellant renders any after sale services or otherwise, clouser of the agreement expects him to do so hence the services are taxable under the category of Business Auxiliary Services. He reiterates the findings of both the lower authorities.
5. We have considered the submission made at length by both sides and perused the records.
6. The issue involved in this case is during the period 1.7.2003 to 31.3.2007, the services rendered , if any, by the appellant under Technology Transfer Agreement with Lubrizol Corporation USA is taxable under Business Auxiliary Services if any, is amounting to export of services or otherwise.
7. In our considered view, without on going into various other arguments raised by both sides, we find that there is no dispute at to the facts that appellant is receiving an amount of 3% of the sales value of the sales effected by Lubrizol corporation USA in India directly by bidding in various tenders. As correctly pointed out by learned counsel, assuming that appellant has rendered service of sales and promotion on the cells of Lubrizol Corporation in India, then seal services have to be considered to be export of services is the law settled. It is also to be noted that this ratio is nor settled by the honorable High court of Bombay in the case SGS India Pvt. Ltd. (supra). We reproduce the relevant paragraph numbers 23 & 24.
23. We are of the opinion that the services rendered in the present case are fully covered by the clarification given and even by the principle laid down in the decision of the Hon ble Supreme Court of India. In this regard, if one refers to the allegations in the show cause cum demand notice, it is apparent that the same refers to the testing charges received by the respondent in convertible foreign currency in respect of services rendered by it in India to its foreign clients. Though the show cause notice refers to the circulars, what is apparent from the judgment of the Honble Supreme Court in the case of All India Federation of Tax Practitioners v. Union of India, 2007 (7) S.T.R. 625 that Service Tax is a tax on each activity, When it comes to a Service Tax on professions, the service rendered are of advise and hence, the Honble Supreme Court with regard to the nature of the tax concluded that it is rendered by a Chartered Accountant, for example when he advises his client or audits his account. Similarly, a cost accountant charges his client for advice as well as doing his work of costing. For each transaction or contract, Chartered Accountant/Cost Accountant renders professional based services. However, Mr. Sridharan submits if the taxable event is the provision of services, then, the place where the services have been rendered is of significance. The services will be taxable only if they are provided within India. Mr. Sridharan submits that Service tax is a destination based consumption tax and therefore, it is not applicable on export of services.
24. In the present case, the Tribunal has found that the essessee like the respondent rendered services, but they were consumed abroad. The clients of the respondents used the services of the respondent in inspection/test analysis of the goods which the clients located abroad intended to import from India. In other words, the clients abroad were desirous of confirming the fact as the whether the goods imported complied with requisite specifications and standards. Thus, client off the respondent located abroad engaged the services of the respondent of inspection and testing the goods. The goods were tested by the respondents in India. The goods were available or their samples were drawn for such testing and analysis in India. However, the report of such tests and analysis was sent abroad. The clients of the respondent were foreign clients, paid the respondent for such services rendered, in foreign convertible currency, It is in that sense that the Tribunal holds that the benefit of the services accrued to the foreign clients outside India. This is termed as export off service. In these circumstances, the Tribunal takes a view that if services were rendered to such foreign clients located abroad, then, the act can be termed as export of service. Such an act does not invite a Service Tax liability. The Tribunal relied upon the circulars issued and prior thereto the view taken by it in the case of KSH International Pvt. Ltd. V. Commissioner and B.A. Research India Ltd. The case of the present respondent was said to be covered by orders in these two cases. To our mind, once the Honble Supreme Court has taken the view that Service Tax is a value added tax which in turn is destination based consumption tax in the sense that it taxes noncommercial activities and is not a charge on the business, but on the consumer, then, it is leviable only on services provided within the country. It is this finding and conclusion of the Honble Supreme Court which has been applied by the Tribunal in the facts and circumstances of the present case.
8. In yet another case, in a similar issue it is now held in the favor of the appellant by the majority decision of Tribunal in the case of Microsoft Corporation-(supra), wherein the majority view is that service was being provided to foreign recipient company to be used in their country and they may or may not result in any sale of product in Indian soil, though Indian services for sail of product in India, they are to be considered as export of services not liable to be taxed.
9. We find that the period involved in this case is that from 01.07.2003-31.3.2007 during the relevant period, though the export of services rules was not in place for the period 01.07.2003 to 31.3.2007, the issue for this period is covered by the judgment of the Tribunal in the case of Paul Merchant Ltd.vs. CCE, Chandigarh 2013 (29) STR 257 (Tri.-Del.) wherein the period involved was the very same.
10. In view of the forgoing and authoritative judicial pronouncement, we hold that the impugned order is unsustainable and liable to be set aside.
11. Since we have disposed of the appeal, upon the issue export of services is non taxable; we have not recorded any findings on other submissions by both sides.
12. Accordingly, in the facts and circumstances of this case, we set aside the impugned order and allow the appeal with consequential relief, if any.
(Dictated in Court) (C.J.Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial) akp 1 9 Appeal No. ST/188/10-MUM