Custom, Excise & Service Tax Tribunal
Thomson Reuters India Pvt. Ltd vs Commissioner Of Service Tax, Mumbai-I on 25 September, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal No. ST/85331, 86357 to 86359/2013-Mum. (Arising out of Order-in-Original No. 89-92/NG/COMMR/Th-II/2012 dated 22/10/2012 passed by the Commissioner of Central Excise, Thane-II ) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.S. Pruthi, Member (Technical) ============================================================
1. Whether Press Reporters may be allowed to see :
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 :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental :
authorities?
=============================================================
Thomson Reuters India Pvt. Ltd.
:
Appellant
VS
Commissioner of Service Tax, Mumbai-I
:
Respondent
Appearance
Shri Prasad Paranjape, Advocate with
Ms. Puja Patke, C.A. for Appellant
Shri V.K. Singh, Sp. Counsel for respondent
CORAM:
Mr. Ashok Jindal, Member (Judicial)
Mr. P.S. Pruthi, Member (Technical)
Date of hearing : 25/09/2014
Date of decision : 25/09/2014
ORDER NO.
Per : Ashok Jindal
There are four appeals and four stay petitions directed against Order-in-Original No. 89-92/NG/COMMR/ Th-II/2012 dated 22/10/2012 passed by the Commissioner of Central Excise, Thane II. Since the issue involved is common in all these appeals, they are taken up together for consideration and disposal.
2. The appellant herein is M/s. Reuters India Pvt. Ltd., Mumbai. They are a part of the Reuters Group world wide. For the purpose of service tax, they are registered with the department under the category of On-Line Information and Database Access and/or Retrieval Services. During the course of audit of the records of the company, it was noticed that the appellant had received data and edit fees in convertible foreign exchange from M/s. Reuters Ltd., U.K., a sister-concern. It was also noticed that the appellant had purchased equipment from Reuters Ltd., U.K. and maintained communication lines for providing Reuters services in India. The department was of the view that the services rendered in the form of maintenance of communication lines was classifiable as Maintenance or Repair Services as defined in Section 65(64) of the Finance Act, 1994 (Act in short) read with Section 65(105)(zzg). It was further observed that the appellant had received marketing fees from Reuters Transmission Services Ltd., U.K., for providing marketing and other support services in relation to Reuters products distributed by the appellant in India and the said activity appeared to merit classification under Business Auxiliary Services vide Section 65(19) read with Section 65(105)(zzb) of the said Finance Act. Accordingly, four show cause notices dated 23/10/2008, 08/10/2009, 01/10/2010 and 27/10/2011 were issued to the appellant for the period 2003-04 to 2006-07, 2007-08 to 20087-09, 2009-10 and 2010-11 demanding service tax of ` 43,88,75,968/-. Of the above amount, ` 43,51,43,874/- was towards edit and data fee services and ` 57,79,342/- was towards marketing and other support services. The said notice was adjudicated and vide the impugned order the learned Commissioner confirmed a service tax demand of ` 43,09,23,218/- along with interest thereon and also imposed penalties under Sections 75, 76, 77 and 78 of the Finance act, 1994. Aggrieved of the same the appellant is before us.
3. The learned counsel for the appellant makes the following submissions:
3.1. Edit and data fee services and marketing and other support services were rendered by the appellant to their sister-concern in U.K. in terms of an agreement dated 24/09/2004. The Reuters Group produced news and financial information and related products. The appellant is engaged in collecting and providing, to Reuters Ltd., UK, data for inclusion in those products. For the services rendered, Reuters Ltd., UK, compensated the appellant on a cost plus basis. The service rendered by the appellant to their sister-concern is more appropriately classifiable under Business Support Services as defined under Section 65(104c) of the Act and, therefore, the classification proposed in the impugned order under the category of Management, Maintenance or Repair Service is patently incorrect.
3.2. It is further contended that Business Support Service became taxable only from 01/05/2006 and under the Export of Service Rules, 2005, the same was falling under category 3. Since for the services rendered, the appellant had received the consideration in convertible foreign exchange, the services rendered by the appellant to the foreign entity will qualify as exports and hence not liable to service tax. Reliance is placed on the decision of the Tribunal in the case of Paul Merchants Ltd. vs. Commissioner of Central Excise, Chandigarh 2012-TIOL-1877-CESTAT-DEL-LB. The adjudicating authority has held that during the impugned period the appellant had declared dividends which had been repatriated abroad and, therefore, the appellant is not eligible for the benefit of exports since repatriation of dividends would amount to repatriation of export proceeds. However, this finding of the learned adjudicating authority is not sustainable in law and this Tribunal in the case of Maersk India Pvt. Ltd. vs. Commissioner of Service Tax, Mumbai 2007 (8) STR 627 had held that declaring of dividends is not equivalent to repatriation of export proceeds.
3.3. As regards the Business Auxiliary Services rendered by the appellant, the appellant rendered the marketing and other supporting services to Reuters Transmission Services Ltd., which involved provision for advertisement, promotional and other services. In consideration thereof, the appellant received the consideration in convertible foreign exchange. Therefore, this service also would qualify as exports and hence would not be liable to service tax.
3.4. In view of the above the appellant prays for grant of stay and waiver from pre-deposit of the dues adjudged.
4. The learned Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority. He submits that the appellant has communicated data using the equipment and communication lines supplied by the foreign sister-concern and the appellant is bound to maintain these communication lines and undertake repairs whenever necessary. Therefore, the activity undertaken by the appellant would amount to maintenance or repair service as held in the impugned order. In view of the above he pleads for putting the appellant terms.
5. We have carefully considered the submissions made by both the sides. We have also perused the agreement entered into by the appellants with Reuters Ltd. U.K. As per the agreement Reuters Limited, U.K. are engaged in producing news and financial information and related products compiled by the Reuters Group situated all over the world and the appellant, the Indian entity, is required to collect and provide data for inclusion in the Reuters products. For the services rendered Reuters Ltd., UK has agreed to compensate the appellant for performing such activities and for the related financial risks. As regards the editorial services the appellant is required to collect from all sources including but not limited to journalists, photographers and cameraman and supply to Reuters Ltd., U.K., a file of general, political and economic and financial news reports and pictures and news film of its standard suitable for use in the Reuters Group media products and other information products. Such file has to be supplied to the foreign entity by electronic or other means. In consideration for the services rendered, the foreign entity, Reuters Ltd., U.K., is required to pay a fee to the appellant in an amount equal to 108% of the costs and expenses incurred by the appellant in providing those services. Thus, as per the agreement, the services rendered is one of collecting, collating, verifying data and transmission of the same to the foreign-sister concern of the appellant. The information has to be transmitted either electronically or otherwise and the consideration is paid on cost plus basis. Thus, the services rendered by the appellant does not seem to be of the nature of any management or repair services as alleged in the show cause notices and as concluded in the impugned order. The data furnished by the appellant is used by the foreign entity for inclusion in their products for dissemination to the customers situated world wide. In other words, the activity of the appellant supports the business undertaken by the foreign entity abroad. Thus, we find there is merit in the argument of the appellant that the activities undertaken by them, merits classification under Business Support Services.
5.1. It is also a fact that the appellant has received consideration for the services rendered in convertible foreign exchange. Business Support Services merit classification under Rule 3(i)(iii) of the Export of Service Rules and if the services were rendered from India and consideration is received in convertible foreign exchange, then the transaction would amount to exports. In the present case, there is no dispute that the appellant has rendered the services from India and the appellant has received the consideration in convertible foreign exchange. In view of the above factual position, the services rendered by the appellant would merit classification as export of services from India. On export of services, service tax liability is not attracted. The argument of the department that the appellant has repatriated the export proceedings by declaring dividends is unsustainable in law for the reason that declaration of dividends is out of the profits made by the appellant and has nothing to do with the exports undertaken by the appellant. This Tribunal in the case of Maersk India Pvt. Ltd., cited supra, has held that declaration of dividends is not equivalent to repatriation of the consideration for the export of services.
5.2. Further, we have perused the balance sheet of the appellant during the impugned periods. From the balance sheets it is evident that during the periods i.e. 2003-04 to 2011-12, the appellant had not declared any dividend whatsoever. Thus, factually also the impugned order is incorrect inasmuch as no dividends have been declared by the appellant during the impugned period and therefore the question of repatriation would not arise at all. Thus, the impugned orders lack merits.
6. Accordingly, we set aside the impugned orders and allow the appeals with consequential relief (if any).
(Pronounced in Court) (P. S. Pruthi) Member (Technical) (Ashok Jindal) Member (Judicial) Sm ??
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