Custom, Excise & Service Tax Tribunal
Ixla Technologies P.Ltd vs Commissioner Of Service Tax Kol on 22 October, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
KOLKATA
REGIONAL BENCH - COURT NO.1
S. Tax Appeal No. 33 of 2009
Arising out of Order-in-Original No.28/Commr./ST/Kol/2008-09 dated 26.11.2008
passed by Commissioner of Service Tax, Kolkata.
M/s. IXIA Technologies (P) Ltd.
Infinity Tower-II, 8th Floor,
Block GP, Sector V, Salt Lake, Kolkata, 700091 Appellant (s)
VERSUS
Commr. of Service Tax, Kolkata
Central Excise Bhavan, 180, Santipalli, 3rd Floor,
Rajdanga Main Road, Kolkata, 700107
Respondent (s)
AND S. Tax Appeal No. 50 of 2009 Arising out of Order-in-Original No.28/Commr./ST/Kol/2008-09 dated 26.11.2008 passed by Commissioner of Service Tax, Kolkata.
Commr. of Service Tax, Kolkata Central Excise Bhavan, 180, Santipalli, 3rd Floor, Rajdanga Main Road, Kolkata, 700107 Appellant (s) VERSUS M/s. IXIA Technologies (P) Ltd.
Infinity Tower-II, 8th Floor, Block GP, Sector V, Salt Lake, Kolkata, 700091 Respondent (s) APPERANCE :
Shri Samir Chakraborty, Sr. Advocate & Shri Rajeev Agarwala, C. A. for the Appellant Shri S. S. Chattopadhyay, Authorized Representative for the Respondent CORAM:
HON'BLE MR. P. K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL) ORDER NO.FO/76382-76383/2019 Date of Hearing : 24.07.2019 Date of Pronouncement : 22 October 2019 PER P.K.CHOUDHARY :
Since both the appeals have been filed against Order-in-Original dated 26.11.2008 passed by the Ld. Commissioner of Service Tax, Kolkata, 2 S. Tax Appeal Nos. 33 & 50 of 2009 they are taken up together for disposal by this common order. These appeals were earlier disposed by this Tribunal by way of remand vide Order FO/78363-78364/2017 dated 29.11.2017 with the observation that DGCEI is not the competent authority to issue notice, as held by the Hon'ble Delhi High Court in the case of Mangali Impex Ltd vs. UOI 2016 (335) ELT 605 (Del). The Revenue being aggrieved by the said order had filed an appeal the Hon'ble High Court of Calcutta. The Hon'ble High Court vide Order dated 16.01.2019,while noting the fact that aforesaid decision of the Delhi High Court has been stayed by the Apex Court, has directed this Tribunal to pass a reasoned order. These appeals are accordingly taken up for disposal on the basis of law as on date without taking into consideration the legal issue as to whether DGCEI is competent to issue the show cause notice.
2. Briefly stated the facts of the case are that the assessee, M/s. Ixia Technologies Pvt Ltd, entered into a representative agreement effective from 1st April, 2005 with M/s Ixia USA (Foreign Company) in terms of which the assessee company inter-alia acted as exclusive representative of the Foreign Company to solicit orders from customers in India for its products and to provide marketing support services to maximise the sales of such products in India for commission as agreed by the parties in foreign currency. The assessee company claimed exemption from service tax levy on the consideration that the services rendered by them to Foreign Company constituted 'export of service' as per the Export of Services Rules, 2005 (Export Rules). The Ld. Commissioner while accepting the fact that the services had been used outside India, the foreign service recipient was located outside India and the commission was received in convertible foreign currency held that since the services were not delivered outside India, the conditions laid down in the Export Rules were allegedly not satisfied. Based on the said findings, he confirmed demand of service tax of Rs. 41,11,398/- with interest and penalty for the period 15.03.2005 to 28.02.2007, against which the assessee company has preferred the instant Appeal bearing no ST-33/2009. Vide the said adjudication order, the Ld. Commissioner has dropped the demand proposed in the impugned show cause notice for the subsequent period March 2007 to June 2007, against which portion the Revenue is in Appeal bearing no. ST/50/2009.
3S. Tax Appeal Nos. 33 & 50 of 2009
3. Dr. Samir Chakraborty, Sr. Advocate, and Shri Rajeev Agarwal, CA, appeared for the assessee and Shri S. S. Chattopadhyay, A.R. appeared for the Revenue.
4 At the outset, the Ld. Counsels for the assessee submitted that the Export of Services Rules, 2005, as introduced in the statute vide Notification no. 9/2005-ST dated 03.03.2005, w.e.f. 15.03.2005 has been amended from time to time. He took us through the various amendments made in the Export Rules as also enclosed in page nos. 79 to 85 of the appeal paper book. He submitted that the provision contained in Export Rules from 15.03.2005 to 18.04.2006, export of business auxiliary services meant such taxable services which are provided or used in or in relation to commerce or industry and the recipient of such service is located outside India. He submitted that during that period, there was no condition that service should be "delivered outside India and used in business or for any other purpose outside India". He accordingly submitted that during the period from 15.03.2005 to 18.04.2006, the services rendered by the assessee fulfilled the requirement of Export Rules and thus exempted from payment of service tax. He also submitted that there was no dispute on the fact that service recipient (Foreign Company) had no office in India and that the subject services rendered have been used in or in relation to commerce or industry. He further stated that the above legal position was specifically submitted before the Ld. Commissioner however, the Ld. Commissioner has chosen to ignore the same.
For the period from 19th April, 2006 to 28th February, 2007, the Ld. Counsels submitted that legal provisions as contained in the Export Rules required that services (Business Auxiliary Services) when rendered in relation to business or commerce should be provided to recipient located outside India who had no commercial establishment or any office in India. The additional conditions that were made applicable was that such services is delivered outside India and used outside India and that payment is received in convertible foreign currency. It is the submission of the Ld. Counsels for the assessee that the assessee has been appointed to act as a non-exclusive representative of the Foreign Company in India and to solicit orders from customers in Indian Territory for the purchase of products of the Foreign Company and to provide marketing support services in connection therewith. All the orders collected by the assessee were 4 S. Tax Appeal Nos. 33 & 50 of 2009 forwarded to Foreign Company and there is no allegation or finding in the impugned show cause notice or order to the contrary. Whether or not the orders procured by assessee would be accepted by the Foreign Company is the sole discretion of the Foreign Company. The contracts with the approved customers were also to be arranged and concluded only by the Foreign Company and the assessee had no role in the same. Thus, he submitted that there was use of the services outside India. The job of soliciting orders and providing the same to Foreign Company in USA with the detail of such prospective orders was completed only when the same were delivered to Foreign Company in USA and hence, the delivery of such orders took place in USA when the Foreign Company received the same from the assessee. The recipient of service being the Foreign Company located in USA has no commercial establishment or any office in India, the service cannot be said to be delivered in India.
The Ld. Counsels relied on the decisions of this Tribunal in the case of Airbus Group India Pvt. Vs. CST 2016 (45) STR 120 (Tri), CST vs. AVL India Ltd 2017 (4) GSTL 59 (Tri) and Sumitomo Corporation India Pvt Ltd vs. CST 2017 (50) STR 299 (Tri). He also contested the demand on limitation and imposition of penalty.
5. The Ld. AR for the Revenue supported the findings made by the Ld. Commissioner and submitted that since the end buyers are located in India, the services rendered by the assessee have been confined in Indian soil even though the products of the Foreign Company have been sold or marketed in India. He submitted that in the given case of assessee, the services can neither be said to be have been used or delivered outside India, the subject services never constituted export of services. On the said count, he prayed that the portion of demand dropped by the Ld. Commissioner be also demanded for which the Revenue has filed the appeal.
6. Heard both the sides and perused the appeal records.
7. We find that the Ld. Commissioner in his impugned order has accepted that the services provided by the assessee have been used outside India and that the payment for the said services have been received in convertible foreign exchange. He has however observed that since the products of the Foreign Company have been marketed or sold to customers in India, the services are not delivered outside India.
5S. Tax Appeal Nos. 33 & 50 of 2009
8. We find that the identical issue has been dealt by the Tribunal in Airbus Group India Pvt. (Supra) for the period 2006 to 2011 wherein it has been held that the services provided by assessee would qualify as export of service even if the activities were undertaken in the Indian soil upon the instructions of service recipient located outside India. The relevant portion of the above decision is quoted below:-
"4. We have heard both the sides and examined the appeal records. On the first issue regarding tax liability of the appellant under BAS, a perusal of the general services agreement indicates the nature of service provided by the appellant to the foreign companies. These are mainly relating to research, collection and analysis of information in India, planning business analysis, giving advice, coordination, permission of products, representing foreign companies in the events and seminars, etc. The admitted fact is that the foreign companies with whom the appellant entered into agreements do not have any office in India. These activities carried out by the appellant where services which are actually received and used by the foreign companies. The conditions of Rule 3(1) along with sub-Rule (2) of Export of Service Rules, 2005 have been fulfilled in the present case by the appellant. The Original Authority recorded that though the order for providing impugned services came from foreign companies the said services were delivered to and used by customers of foreign company located within India. Hence, he concluded the appellants rendered services in India which resulted in promotion of business of foreign companies and hence these should be considered for taxation as services provided within India. We also noticed that the learned Original Authority brushed aside the various decided cases relied upon by the appellant with cryptic remarks. In fact he also recorded that the Tribunal's decision in favour of appellant in two cases have not reached finality as the SLPs are pending before Hon'ble Supreme Court.
5. On the first issue relating the appellants liability under BAS it is now a well settled legal position that the service involved is in fact exported out of India and there is no service tax liability. In M/s. Paul Merchants Ltd. v. CCE, Chandigarh reported in 2013 (29) S.T.R. 257 (Tri. - Del.) it is held that what constitutes export of service is to be determined strictly w.r.t. the provisions of Export of Services Rules, 2005. It is the 6 S. Tax Appeal Nos. 33 & 50 of 2009 person who requested for the service and is liable to make payment for the same who has to be treated as recipient of service and not the person affected by the performance of the service. Thus, when the person on whose instructions the services, in question, has been provided and is located abroad, the destination of services, in question, has to be treated abroad. The destination has to be decided on the basis of place of consumption, not the place of performance of service in case of Business Auxiliary Service. In Microsoft Corporation (I) Pvt. Ltd. v. CST, New Delhi reported in 2014 (36) S.T.R. 766 (Tri. - Del.), the Tribunal held that the Business Auxiliary Services of promotion of market in India for foreign company amount to export of services. The Export of Services Rules, 2005 is considered as destination based consumption tax in accordance with declaration of law by the Hon'ble Supreme Court in All India Federation of Tax Practitioners v. Union of India reported in 2007 (7) S.T.R. 625 (S.C.). In Gap International Sourcing (India) Pvt. Ltd. v. Commissioner reported in 2015 (37) S.T.R. 757 (Tribunal), it is held that the Tribunal followed the similar ratio w.r.t. interpreting the Export of Service under BAS. We find that the decided case laws, as discussed above, and the factual position as reflected by the agreements entered into by the appellants clearly show that the impugned order regarding service tax liability of the appellant on these services is not legally sustainable."
Identical views have been taken in the case AVL India Ltd (Supra) wherein it has been held that :-
"8.On the first issue, we find that the services rendered by the respondent were in relation to procuring orders and promoting products, of foreign suppliers. Admittedly, the said services fall under the category of "BAS". However, it is a well settled legal position that the nature of service rendered by the respondent is consumed by the foreign supplier of goods. The benefit is directly accruing to such foreign entities. The Tribunal held that in respect of "Business Auxiliary Service"
(Category III Services), the person to whom the benefits accrued, has to be considered. Based on the said person's locations, the question of export of service will be decided. As rightly pointed out by the Original Authority, the service tax is sought to be levied on the services provided by the respondent to the foreign suppliers and the consideration is received from such suppliers. The tax is not relating to the products 7 S. Tax Appeal Nos. 33 & 50 of 2009 sold in India. The decision of the Tribunal in Microsoft Corporation India Pvt. Ltd. - 2014 (36) S.T.R. 766 (Tri.-Del.) and followed in various other decisions - GAP International Sourcing (India) Pvt. Ltd. - 2015 (37) S.T.R. 757 (Tribunal); Bobst India Pvt. Ltd. - 2016 (44) S.T.R. 316 (Tri.-Mum.) are relevant in this case. In our opinion, there is no tax liability on the respondent in respect of services, which are rendered to the suppliers of the goods from foreign countries. The activities of export of service is not to be taxed."
9. Therefore, the issue is no longer res-integra since the same stands decided by the co-ordinate Benches of this Tribunal. We find force in the submission of the Ld. Counsels for the assessee regarding the fact that the sale of the products and services manufactured or provided by the Foreign Company have been made by the assessee to the Indian customer / client is completely immaterial inasmuch as the assessee has provided the services at the behest of service recipient located outside India. Given the above factual scenario and the law settled by the decisions of this Tribunal, the subject services are to be held to be used outside India as well as delivered outside India and therefore, constitutes export of service on which no service tax stands payable.
10. In view of the above discussions, the impugned demand of service tax is set aside and the appeal filed by the assessee is allowed with consequential relief as per law. The appeal filed by the Revenue being devoid of any merit is thus rejected.
(Pronounced in the Open Court on 22/10/2019.) Sd/-
(P. K. Choudhary) Member (Judicial) Sd/-
(P. V. Subba Rao) Member (Technical) Pooja