Custom, Excise & Service Tax Tribunal
A.T.E Enterprises Pvt. Ltd vs Commissioner Of Service Tax on 7 January, 2015
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No.ST/89761/13 (Arising out of Order-in-Original No.50-53/ST-II/RS/2013 dated 30/08/2013 passed by Commissioner of Service Tax, Mumbai-II) For approval and signature: Honble Mr.M.V. Ravindran, Member (Judicial) Honble Mr. P.R. Chandrasekharan, 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 :Yes 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? ========================================
A.T.E Enterprises Pvt. Ltd., Appellant Vs. Commissioner of Service Tax, Respondent Mumbai Appearance:
Shri.Bharat Raichandani, Advocate for appellant Shri.B.S.Meena, Addl. Comm. (AR), for respondent CORAM:
Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 07/01/2015 Date of Decision : 07/01/2015 ORDER NO Per: M.V. Ravindran
1. This appeal is directed against Order-in-Original No.50-53/ST-II/RS/2013 dated 30/08/2013 passed by Commissioner of Service Tax, Mumbai-II.
2. The relevant facts that arises for consideration are 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. CERA audit party entertained a view that the appellant is liable to discharge service tax liability 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. Such CERA audit enquiry, the appellant gave a detailed reply. The said explanation was not accepted by the audit party and a show-cause notice dated 19/03/2009 was issued to the appellant directing them to show cause as to why the amount of service tax liability of Rs.5,32,96,615/- being not demanded and recovered from them along with interest and also why penalties should not imposed on them under various sections. Appellant contested the show-cause notice on merits. The adjudicating authority after following the due process of law, did not accept the contentions raised by the appellant and confirmed the demand of service tax along with interest and imposed penalties under various sections.
3. The learned Counsel appearing on behalf of the appellant would take us through the entire show-cause notice and the order-in-original. He would also take us through a sample agreement entered by appellant with the overseas manufacturers and submit that the duties which are cast upon the appellant are only to procure the orders and pass it on to the overseas manufacturers, who on execution and receipt of payment, will give the commission to the appellant, as agreed upon. He would submit that the adjudicating authority has confirmed the demands based upon the stay order passed by the Tribunal in the case of Microsoft Corporation Indian Private Ltd. He would also submit that the issue is no more res integra and has been decided in favour of the assessee in the following cases:
a) Vodafone Essar Cellular Ltd., Vs. CCE, Pune 2013 (31) STR 738
b) Paul Merchants Ltd., Vs. CCE, Chandigarh 2013 (29) STR 257 Tri-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, Final Order No.A/1611/14/CSTB/C-1 in Appeal No.ST/74/08-Mum It is his submission that in view of the above, the impugned order be set aside.
4. The learned departmental representative on the other hand would draw our attention to the findings recorded in the order-in-original and submit that the assessee has not disputed that they are procuring orders from the Indian companies and passing them on to the overseas manufacturers. It is his submission that the appellant has 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. He would also draw our attention to the findings recorded by the adjudicating authority as to that the appellant was not only procuring the orders but they are also assembling and organizing and collects receivables from the clients.
5. In a rejoinder, the learned Counsel would submits that the findings recorded by the adjudicating authority as to the appellant supports assembling and organizing on imports and collects receivables from the client is factually incorrect. He would draw our attention to the various submissions made by them before the lower authorities for this purpose.
6. We have considered the submissions made at length by both the sides and perused the records.
7. The issue involved in this case is regarding whether the appellant is to be saddled with the service tax liability on an amount received by them as commission for procuring orders on behalf of overseas manufacturers. It is undisputed that the 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 procured by the appellant.
8. We find from the records that the appellant does not engage himself in assembling and organizing of the imports. His 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).
9. In this case we find that there was an agreement between the appellant and the foreign telecom service provider as per which the appellant had agreed to provide telecom services to the customers of foreign telecom service provider when he is in India and using the appellant telecom networks. Revenue held a view that the consideration for services rendered in India is taxable under Business Auxiliary Service. The Bench after considering the provisions of Export Services Rules and Board clarifications, and the decision of Microsoft Corporation (I) Pvt. Ltd. case held in favour of the assessee by recording as under:
54. In view of the above, the difference of opinion on various points is resolved as under:
(i) That the business auxiliary services of promotion of market in India for foreign principal made in terms of agreement dated 01/07/2005 amount to Export of Services and the Honble Supreme Court decision in the case of State of Kerala and Others Vs. The Cochin Coal Company Ltd. [1961 (12) STC 1 (SC) as also Burmah Shell Oil Storage and Distrusting Co. of India Ltd., Vs. Commercial Tax Officers [1960 (11) STC 764] = 2002-TIOL-966-SC-CT-CB explaining the meaning of export is not relevant inasmuch as the same deals with the export of goods and not export of services;
ii) That the Business Auxiliary Services provided by the assessee to their Singapore parent company was delivered outside India as such was used there and is covered by the provisions of Export of Service Rules and are not liable to Service Tax.
iii) The principal of equivalence between the taxation of goods and taxation of services, as laid down by the Honble Supreme Court in the case of All India Federation of Tax Practitioners [2007 (7) STR 625 (SC) = 2002-TIOL-149-SC-ST as also the principals of destination based consumption tax where in the context of Constitutional Authority of levy of Service Tax on certain services and the issue of Export of Service in terms of Export of Service Rules was not the subject matter of said decision. The Export Service Rules, 2005, being destination based consumption tax are in accordance with the declaration of law by the Honble Supreme Court.
iv) Inasmuch as the appeal No.ST/828/2010 was not argued by both the sides, the same can be listed for final disposal even though issue involved is identical.
v) Having held that services involved were export of services, the same are not liable to be sustained against the appellants.
10. In case of Paul Merchants Ltd. case (supra) there was a difference of opinion between the Honble Member (Judicial) and the Honble Member (Technical) which was referred to 3rd Member held in favour of the assessee and by a majority order it was held that:
The point of difference as mentioned in Para 60 of the referral order has been answered by third Member as under :-
In view of the above discussion, the points of difference, mentioned in para 60 are answered as under :-
(i) The term export has not been defined either in Article 280(1)(b) or in any of the article of the Constitution of India. Though the Apex Courts judgments in the case of the State of Kerala v. The Cochin Coal Company Ltd. [(1961) 2 STC 1 SC] and Burmah Shell Oil Storage & Distribution Co. of India v. Commercial Tax Officer & Others reported in (1960) 11 STC 764 (SC) explain the meaning of the term export, the ratio of these judgments which are with regard to export of goods, is not applicable for determining what constitutes the export of services. There is no question of Export of Services Rules, 2005, being in conflict with Article 286(1)(b) of the Constitution of India.
(ii) The principle of equivalence between the taxation of goods and taxation of service had been laid down by the Apex Court in the case of Association of Leasing & Financial Service Companies v. Union of India (supra) and All India Federation of Tax Practitioners v. Union of India (supra) in the context of constitutional validity of levy of Service Tax on certain services. This principle does not imply that Service Tax should be levied and collected in exactly the same manner as the levy and collection of tax on goods or that export of service should be understood in exactly the same manner in which the export of goods is understood. In fact the question as to what constitutes the export or import of service was neither raised nor discussed in the above-mentioned judgments of the Apex Court. As discussed in this order, the Export of Services Rules, 2005 are in accordance with the Apex Courts ruling in the above-mentioned judgments that Service Tax is a value added tax, which in turn is a destination based consumption tax in the sense that it is levied on commercial activities, and it is not a charge on the business but a charge on the consumers. There is nothing in Export of Service Rules, 2005 which can be said to be contrary to the principle that a service not consumed in India is not be taxed in India.
In yet another case of Microsoft Corporation (I) Pvt. Ltd., also ended up with a difference of opinion on similar facts by majority decision , issue was held in favour of the assessee.
11. In the recent case of GAP International Sourcing (India) Pvt. Ltd. (supra) the co-ordinate Bench of this Tribunal held in favour of the assessee wherein the facts were more or less similar. That is, the appellant M/s.GAP International Sourcing (India) Pvt. Ltd., entered into a service support agreement with Gap USA for rendering various services relating to procurement of goods, recommending fabrics to be used for manufacture of garments, recommending vendors from which fabrics, yarn, zippers, buttons, snap fasteners, etc. can be procured, reporting the status of manufacture of products by the chosen vendors, analyzing the reports of the samples sent by the vendors, giving recommendation about the product integrity, inspecting export consignments and issuing inspection certificates, etc. Issue as to these were export of service or taxable in India; it was held that when the service provided by a person in India is consumed and used by a person abroad, co-ordinate Bench relied upon the judgement of the Paul Merchants Ltd. case; interpreting provisions of export of service rules to hold such services as rendered by M/s.GAP International Sourcing (India) Pvt. Ltd. would be export of services and would not fall under the category of BAS. The said ratio is applicable in full force in the case in hand.
12. In view of the foregoing judicial pronouncements and in the facts of this case, we find that the impugned order is unsustainable and liable to set aside and we do so.
13. The impugned order is set aside and the appeal is allowed.
(Operative part of order pronounced in court on completion of proceedings) (P.R. Chandrasekharan) Member (Technical) (M.V. Ravindran) Member (Judicial) pj 1 9