TMI Blog2014 (10) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... ng provided by the appellant to his principal located in Singapore. The marketing operations done by the appellant in India cannot be said to be at the behest of any Indian customer. The service being provided may or may not result in any sales of the product in Indian soil. The transactions and activities between the appellant and Singapore principal company are the disputed activities. As such, the services are being provided by the appellant to Singapore Recipient company and to be used by them at Singapore, may be for the purpose of the sale of their product in India, have to be held as export of services. Business auxiliary services of promotion of market in India for foreign principal made in terms of agreement dated 1.7.2005 amount to Export of Services and the Hon’ble Supreme Court decision in the case of State of Kerala and Others vs. The Cochin Coal Company Ltd. [1960 (10) TMI 57 - SUPREME COURT OF INDIA] as also Burmah Shell Oil Storage and Distributing Co. of India Ltd. vs. Commercial Tax Officers [1960 (9) TMI 70 - SUPREME COURT OF INDIA] explaining the meaning of export is not relevant inasmuch as the same deals with the export of goods and not export of services - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Revenue opposes the same. ALLEGATIONS MADE IN SHOW CAUSE NOTICE (SCN) 2.1 Show Cause Notice (SCN) dated 24.04.2008 was issued to the appellant covering the period 09.07.2004 to 06.10.2005 making various allegations resulting in contravention of provisions of section 67 and section 69(1) read with section 68 and section 73 of the Act made by the appellant. It was alleged that there was failure of the appellant to seek registration as well as gross value of taxable service provided were incorrectly stated and the appellant failed to deposit service tax into the Government account as required by section 66 of the said Act. It was further alleged that there was failure to remit the service tax leviable within the stipulated time of the service rendered as required by section 68 of the Act read with rule 6 of the Service Tax Rules 1994 and service tax at applicable rates as stipulated under provisions of the aforesaid Act remained unpaid. It was further alleged that there was failure to pay the cess as was leviable under respective law and the appellant had deliberately suppressed material facts from the Department to intentionally evade payment of service tax and has intenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l use its best efforts to assist Subsidiary with technical matters in connection with the marketing of Microsoft Products and Services. 3. MARKETING OF MICROSOFT PRODUCTS 3.1 Marketing. Subsidiary shall have a non-exclusive right to market Microsoft Products in the Territory. 3.2 Subsidiary s Duties. Subsidiary will use its best efforts to further the interests of MO and to maximize the markets for Microsoft Products in the Territory. 3.2.1 Subsidiary shall not solicit orders or agreements from outside the Territory. In soliciting orders, Subsidiary shall only be authorized to inform customers of price, payment, delivery and other terms offered by MO in accordance with information received from MO or its affiliates, as appropriate. Unless otherwise authorized herein or otherwise agreed by the parties, Subsidiary shall not enter into any agreements with customers regarding Microsoft Products, but shall instead promptly submit written customer orders to MO or its affiliates, as appropriate, for its acceptance or rejection. 3.2.2 Subsidiary shall assist MO as requested in collection past due accounts and performing other activities reasonably related to MO s business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax such as a Value Added Tax or a Goods and Services Tax, which consumption tax shall be the responsibility of MO. 6.2 Marketing of Microsoft Products. For assistance in the marketing of Microsoft Products under Article 3, MO shall pay Subsidiary one hundred and fifteen percent (115%) of Subsidiary s actual expenses, less revenues, incurred in connection with its duties as defined in Article 3, provided such expenses comply with Subsidiarys budget, as adjusted from time to time, and provided, further, such expenses are not already covered by another section of this Agreement or covered in another agreement between Subsidiary and MSFT or any MSFT affiliate. Taxes, insurance, duties, freight and other charges not attributable to the Microsoft Product itself paid by the customer shall not be considered in calculating the amount of commission. The commission payments shall be exclusive of any applicable consumption tax such as a Goods and Services Tax or a Value Added Tax which consumption tax shall be the responsibility of MO. 6.3 RGE Services. For RGE Services rendered pursuant to Article 4, MO shall pay subsidiary an amount equal to one hundred and ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xiliary service provider. 4.2 The plea of export of service was discarded in adjudication elaborately discussing the same in Para 224 to 226 of the order which reads as under: 224. The notice has tried to make out a case that under the Market Development Agreement with M/s. M.O. Singapore they were providing Marketing support services. Even though with regard to Marketing Support Services, MCIPL creates services awareness of Microsoft products in India, they were delivered and used abroad in as much as in respect of these services with regard to the condition of services delivered outside India and used outside India, they submitted that the service recipient i.e. Microsoft Singapore did not have any office in India, the provision of marketing support services by MCIPL increased the sales turnover of Microsoft Singapore and impacted the following aspects of business operations of Microsoft Singapore in Singapore, i.e. Production operations, Sales operations, Finance operations, Recruitment plans etc. Therefore, the services were deemed to be delivered and used outside India. In other words, Noticee feels that the place of use of service will also be the place where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry other than where these have been provided. 226 It has been stated in a number of circulars issued by the Board that Service Tax levy is a destination- based tax. This understanding follows similar understanding in some parts of the world. Particularly Europe, where the tax is levied at the place where the services are finally destined or used. The Indian Law, however, has clearly laid down that both the test of customers location and use should be satisfied. This will be clear from the following diagram : USER In India Outside India USE In India 1 (Taxable) 2 (Taxable) Outside India 3 (Taxable) 4 (Export) It is only in situation 4 (subject to meeting other conditions) that the conditions of export are satisfied. It is inconceivable to imagine how maximizing the markets for Microsoft products including all local advertising, performing other activities including dissemination of information to potential customers, commenting on any developments in the Indian territory affecting the software industry, investigating feasibility of new markets for Microsoft retail products and providing other services of marketing nature rendered in India, can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm the basis of coming to the conclusion that either the services of Call Centres/B.P.O.s are comparable to the services rendered by them or whether, if such a practice at all exists at some level, it has attained legal finality or precedential value for the determination of this case. Likewise, comparison made under Foreign Trade Development Regulation Act, 1992 in respect of export of goods are of no avail as the export of goods is an entirely different matter governed by the lay specified elsewhere. 229. Moreover, during the period from 19-4-2006 to 28-2-2007, there was an added requirement that the service should have been delivered outside India and during the period of SCN from 19-4-06 to 31-5-07 there was one more requirement that service should have been provided outside India. The Noticee while interpreting the criterion for any service to qualify as exports has during the periods i.e. 19-4-06 to 28-2-07 and 1-3-07 to 31-6-07 represented that for any service to qualify as export in terms of Export of Service Rules, 2005, as amended, only the condition of delivery and use outside India is required to be fulfilled. They have completely ignored the condition which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices provided by the Appellant in terms of agreement dated 1-7-2005 were export services. Board Circular issued on 24-2-2009 vide No. 111/05/2009-ST in terms of Para 1 (iii) of stated that Indian agents who undertake marketing in India of goods of a foreign seller, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign exchange and such services which would generally include knowledge or technique based services, which are not linked to an identifiable immovable property or whose location of performance cannot be readily identifiable (such as, Banking and Other Financial services, Business Auxiliary services and Telecom services) shall be export service. Interpreting Rule 3(1) (iii) of Export of Services Rules 2005, he submitted that Board clarified that above types of services shall be export : (a) If they are provided in relation to business or commerce to a recipient located outside India; and (b) If they are provided in relation to activities other than business or commerce to a recipient located outside India at the time when such services are provided. 5.2 According to the Appellant, as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar would be the treatment for other Category III [Rule 3(1)(iii)] services as well. 5.4 Ld. Sr. Counsel argued that service recipient being located outside India and that is not being disputed by Revenue; there was export of service which shall enjoy exemption under Rule 3 of Export Service Rules, 2005. Notwithstanding the place of performance of services if the service recipient is located outside India, the phrase used outside India has to be interpreted to mean that the services are used outside India. But such contention was rejected in Adjudication holding that it is not sufficient, if the user of service is located outside India. According to Revenue, not only the use of service should be outside India but also the recipient should be outside India and these two conditions being cumulative have to be satisfied independently. 5.5 It was also argued by ld. Sr. Counsel that Board Circular No. 111/05/2009-ST dated 24-2-2009 clarifies that the relevant factor for category-III (Rule 3 (i) (iii) is the the location of the services recipient and not the place of performance . The phrase used outside India is to be interpreted to mean that the benefit of the services sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2004 to 6-10-2005 on the following grounds : (a) The Central Board of Excise Customs vide circular No. 70/19/03-ST dated 17-12-2003 was pleased to clarify that maintenance/repair service of computer software was not liable to tax since software are not goods. (b) The Ministry changed its stand vide circular No. 81/2/05-ST dated 7-10-2005 communicating that maintenance or repair or servicing of computer software is liable to service tax under section 65(105)(zzg) read with sec. 65(64) of the Finance Act 1994. (c) Consequently, for the period 9-7-2004 to 6-10-2005 the appellants were guided by the Ministrys own circular dated 17-12-2003 which was withdrawn only with effect from 7-10-2005. 5.9 It was also pleaded on behalf of the appellant that both input credit and cum-tax benefit is available to it. 5.10 It was further submitted on behalf of the appellant that Show Cause Notice was issued on 24-4-2008 for which entire demand was time barred because Department was aware of the facts of the case of the appellant when registration application was filed on 17-10-2005 (Page 73 of Paper Book) and export intimation filed on 4-10-2005. So also refund of CENVAT credit relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). Reliance placed on the citations by ld. Sr. counsel for the Appellant did not deal meaning of export under Constitutional provisions of Art. 286 and ratio laid down in Madras marine Judgment (supra). So also none of the decisions of the Tribunal dealt with the principles of equivalence as has been laid down in All India Federation of Tax Practitioners (supra). Therefore those citations are not profitable to the appellant. Board s Circulars no where stated that it had nullified orders of the Tribunal. It is misconstruction of Board Circular by the Appellant. Law declared by Apex Court governs the field. Board circular is not binding on Courts. Therefore decision in each case shall flow on the basis of material facts thereof and according to the law applicable to such facts. Appellant has misconceived meaning of export . Meaning of this term is well known to this country from Constitutional provision and various fiscal legislations like Customs law, Excise law and Export and Import Policy dealing with export . Similar analogy of the term export being applicable to Finance Act, 1994, Board has not intended to interpret the concepts of export otherwise while issuing circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s granted under error of law it is open to the Department to always pass appropriate order and direct the Appellant to pay back the same to the Treasury. Accordingly appeal of the appellant may be dismissed in liminie. FINDING AND DECISION OF TRIBUNAL 7. In order to redress grievance of both sides, the law relating to levy of service tax following principle of Equivalence and meaning of export is necessary to be dealt. PRINCIPLE OF EQUIVALENCE APPLICABLE TO LEVY OF SERVICE TAX 8.1 Law relating to service tax has been laid down by Apex Court in All India Federation of Tax Practitioners - 2007 (7) STR 625 (SC). In Para 22 of the judgment in Association of Leasing Financial Service Companies Vs. Union of India - 2010 (20) STR. 417 (S.C.), Apex Court reiterated service tax jurisprudence in following terms: In All India Federation of Tax Practitioners case (supra), this Court explained the concept of service tax and held that service tax is a Value Added Tax ( VAT for short) 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 on the consumer. That, service tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods and consumption of services as both satisfy the human needs (para-4 of the Judgment). In Para 6 and 7 the Hon ble Court held as under : 6. At this stage, we may refer to the concept of Value Added Tax (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer. 7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax. [Emphasis supplied] 8.3 While dealing with meaning of service tax Hon ble Court in Para 17 to 20 held as under : 17. As stated above, the source of the concept of service tax lies in economics. It is an economic concept. It has evolved on account of Service Industry becoming a major contributor to the GDP of an economy, particularly knowledge-based economy. With the enactment of Finance Act, 1994, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion produced or manufactured would mean that the goods produced must satisfy the test of saleability/marketability. The reason being that the duty under the 1944 Act is on manufacture/production but the manufacture/production is intended for taking such goods to the market for sale. It was observed that the obvious reason for levying excise duty linked with production or manufacture is that the goods so produced must be a distinct commodity known in the market. We quote herein below para 7 of the said judgment, which is as follows: The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must be useable, moveable, saleable and marketable. The duty is on manufacture or production but the production or manufacture is carried on for taking such goods to the market for sale. The obvious rationale for levying excise duty linking it with production or manufacture is that the goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for purposes of buying and selling. Since the solution that was produced could not be used as such without any further proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear that service tax is VAT which in turn is both a general tax as well as destination based consumption tax leviable on services provided within the country.(Emphasis supplied) 8.4 Applying the principle of equivalence as has been laid down by Apex Court, which is inbuilt into the concept of service tax under the Finance Act, 1994, there is no difference between manufacture of marketable excisable goods and providing of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It follows that service tax being a tax on an activity is also destination based value added tax. There is no ambiguity that taxable service provided in India is meant to be taxed under the provisions of Finance Act, 1994. Through different clauses, number of taxable service entries are spread over section 65(105) of the said Act. Terms and expressions used in these clauses are defined by various subsections of section 65 of that Act. MEANING OF EXPORT PRESUPPOSES TAKING OUT OF INDIA TO A PLACE OUT SIDE INDIA 9.1 Material facts, Agreements and recorded statement as well a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argeted consumers in the said territory and nothing to export. Accordingly plea of export of service by appellant is inconceivable. 9.4 In the present cases, market promotion was done by Appellant in the territory of India for sale of MICROSOFT products and rendering of technical support in that territory. Law laid down by Apex Court in the decision of Burmah Shell Oil Storage and Distributing Co. of India Ltd. and Another v. Commercial Tax Officer and Others - (1960) 11 STC 764 (SC) is that in respect of export of goods all exports involve a taking out of the country. The test that the goods must have a foreign destination ought to have been satisfied by the appellant demonstrating that market promotion was done abroad but not in the territory of India. Foreign destination where service would be received as imports is totally absent in the present case. Crucial fact in this case is finding of market by the appellant in India for the foreign principal which brought it to the incidence of tax under Finance Act, 1994 as a Business Auxiliary Service provider. 9.5 Export of Services Rules, 2005 was made in exercise of power conferred on the Central Government. That came int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to bind a Court as has been held by five judges Bench of Apex Court in the case of CCE, Bolpur V. Ratan Melting Wire Industries - 2008 (12) STR 416 (SC). Courts have to declare what particular provision of statute says and not the Executive Circular contrary to statutory provisions and law laid down by Apex Court. Further, Circular contrary to statutory provisions has no existence in law. This is the reason why CBE C vide Circular No. 141/10/2011-TRU dated 13.5.2011 removed the anomaly of Circular No. 111/05/2009 dated 24.02.2009 and there is no element of bias. 9.8 In the course? of hearing, learned Counsel placed reliance on the decisions of Tribunal in case of ABS (India) Ltd. v. - 2009 (13) S.T.R. 65 and Blue Star - 2001 (11) S.T.R. 23. to advance argument that when recipient of services is located outside India, it cannot be said that the services were delivered in India or used in India. Services are utilized only outside India and such services shall be eligible to benefit of export of services. Decision of the Tribunal in the case of Lenovo (India) Pvt. Ltd. - 2009 -TIOL-911-CESTAT-BANG was also relied to submit that that the said case was similar to case of ABC (Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleaded by learned Sr. Counsel that in terms of letter dated 4-10-2005 (Ref: page 47 of the Paper Book) the appellant informed learned Asst. Commissioner, Gurgaon about providing of marketing of services to Microsoft Corporation USA located outside India and as per Rule 3 of Export Services Rules, 2005 the marketing services provided by the Microsoft, USA was export of service. Refund was claimed under Rule 5 of CENVAT Credit Rules, 2005 in respect of input services. Similar such letter was also issued by the Appellant on 30-11-2005 (Ref: page 54 of Paper Book), on 31-1-2006 (Ref: page 56 of Paper Book) and on 31-3-2006 (Ref: page 65 of Paper Book). 11.3 Record reveals that for the first time by letter dated 7-2-2007 acknowledged by Revenue on 9-2-2007 (Ref: page 79 of Paper Book), the appellant informed the Department as above and stating recipient of marketing services provided by the appellant was the Singapore subsidiary of Microsoft USA While appellant was also a subsidiary company of Microsoft USA. It was also informed that the USA concern has no EOU and not required to submit quarterly return to the licensing authority as required by an EOU. The appellant was sanctioned C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As far as fraud and collusion are concerned, it is evident that the intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word willful , preceding the words mis-statement or suppression of facts which means with intent to evade duty. The next set of words contraventions of any of the provisions of this Act or Rules are again qualified by the immediately following words with intent to evade payment of duty. Therefore, there cannot be suppression or mis-statement of fact, which is not willful and yet constitute a permissible ground for the purpose of the proviso to Section 73. A mis-statement of fact must be willful to hold evasion of tax and adjudication for the extended period shall not be time barred in such event. 11.8 In the? circumstances where it is difficult to hold that there has been conscious or deliberate withholding of information by the assessee it can be said that there has been no willful misstatement much less any deliberate and willful suppression of facts. To invoke the proviso to Section 73 of the Finance Act, 1994 a mere misstatement is not enough but such m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) (zzg) of the Finance Act, 1994. This matter in relation to Business Auxiliary Service has come up before the same bench earlier in the appeal filed by Paul Merchants Ltd. and there was difference between my views and the views of my Ld. Brother. The matter is not yet finally decided. There is some difference between the facts of that case and facts of this case. In that case part of the activities constituting the service was taking place outside India. In this case all the activities were taking place in India. But in my view, this difference cannot lead to a different conclusion when the matter is examined with reference to the relevant rules. So I am recording my views and its reasons. 16. The relevant period is 19-04-2006 to Dec 07 for Business Auxiliary Service and 09-07-2004 to 06-10-2005 for Maintenance and Repair Service. A Show Cause Notice dated 24-04-08, was issued for tax which was not paid by the appellants on the ground that the services were actually exported. I agree with the findings of my Ld. Brother on the following issues, namely,- (i) that no liability for service tax on account of Maintenance of Repair of software prior to 07-10-2005 can be enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the clauses of section 65 (105) of the Finance Act, 1994 under which each such service is brought under service tax net. The Category-I is of services is for services relating to properties, like service of an architect. For this category the rule stipulates that if the property is situated outside India the service will be considered as exported. That is to say even if the architect and the person availing the service are situated in India but the property is outside India, the service will clearly be considered to be exported as per Rules in existence after 27-02-2010. The Category-II is of services in respect of which performance is given emphasis and the question whether service is exported, is decided with reference to place of performance. For example Business Exhibition will fall under this category. In this category also even if the person providing service and the person availing the service are situated in India but the exhibition is performed outside India, it will clearly be considered as export of service after 27-92-2010. Category-III is for the rest of the services and here the emphasis is on the location of the person receiving the service. In this category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Export of taxable service. - (1) The export of taxable service shall in relation to taxable services,- --- -- (iii) Specified in clause (105) of section 65 of the Act, but excluding,- (a) Sub-clauses (zzzo) and (zzzv); (b) Those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not related to immovable property; and (c) Those specified in clause (ii) of this rule. When provided in relation to business or commerce, be provision of such services to a recipient located outside India and when provided otherwise, be provision of such services to a recipient located outside India at the time of provision of such service; Provided that where such recipient has commercial establishment or any office relating therein, in India, such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India. (2) The provision of any taxable service shall be treated as export of service when the following conditions are satisfied, namely :- (a) such service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Singapore in this case and if this logic is followed there is no doubt that the service is delivered outside India. 24. In my view the expression delivered outside India which existed in the rules till 28-02-2007 cannot have the same connotation as performed outside India used in same Rules in respect of Category-II services. The legislature has used these two expressions in the same Rules and hence there is a presumption that both the expressions have different meanings. Nothing to rebut this presumption has come out from the legal arguments. This presumption is strengthened by the fact that all the clarifications issued by CBEC prior to 13-05-2011 are consistent with this view and anything contrary does not come out. An interpretation that deliver is to the person paying for the service and not any person who may incidentally benefit from the activity of the service provider, gives a harmonious interpretation. Since the promotion activity was of products belonging to a person resident abroad it is to be considered that the impugned service was delivered outside India. 25. At this stage I note that the clarification issued on 13-05-2011 gives the impression that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a is to be judged with regard to the fact where the benefit accrues (para 3 of the Circular). The clarifications issued by CBEC on 24-02-2009 and 13-05-2011 talks about an interpretation with reference to accrual of benefit . This further strengthens the case of the Appellant and not that of Revenue. 29. I have difficulty in agreeing with the argument that export of service should be determined, especially in the case of category-III services, by looking at the origin and termination of activities constituting a service because this test is not laid down in the Rules. Criterion with reference to activity is the same as a criterion with reference to performance laid down for Category-II. The new concept being introduced is of the last of the activities. If there is a need for such a criterion it has to be introduced specifically in the rules. That is to say Category-III should either be altogether abandoned and services specified in this category should be shifted to Category-II or additional criteria specifically introduced in the Rules applicable for Category-III. Such a criterion can also lead to complication as to what is the last of the activities in a service whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spects for taxing the two, there is a fundamental difference between them in the matter that the former is tangible while the latter is not tangible in most cases though its effect or outcome may be tangible. It is difficult to conceive of taking the service and crossing the border, be it the services of an architect residing in India designing building located outside India (though the tangible outcome namely designs can be carried outside) or be it the activity of a person organizing a business exhibition outside India or be it maintenance of medical records.34. The word export in Article 286 in the Constitution is used with reference to goods. So is the case with definition of export in section 2(18) of the Customs Act, 1962. It will obviously need some dovetailing in the context of export of service which issue has come up only after 1994. It is this dovetailing that is being achieved through export of Service Rules, 2005 and the criteria laid down in the Rules are neither arbitrary nor inconsistent with the any provisions in the Constitution. The issue being dealt with in the Rules is that whether taking out of India should be decided with reference to the situs of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the benefit of the such person (corresponding to excise duty levied on captive consumption), etc. It is not possible to achieve exact equivalence between taxation on goods and services and especially so in the matter of criteria for deciding the question whether services is exported. The Apex Court has not ruled in the above decisions that tax on services and duties on goods are identical footing in all respects. 37. For the above reasons I am of the view that the impugned Business Auxiliary Services were exported as per the provisions of Export of Services Rules, 205 as in force during the relevant period and in this respect I would like to differ with my learned Brother for reasons stated above. 38. In the matter of Appeal No.ST-828/2010 also the basic issue is whether the output service is exported, that is the issue discussed in this order. There were no submissions in respect of that appeal during the hearing. It may be proper that that appeal is heard for any other relevant issue that may be involved in that appeal, after this appeal is finally decided. Mathew John, (Member Technical) Considering the two different views of the Members of the bench of the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived at in terms of two separate orders recorded by two Members of the original Bench stand placed before me, as a Third Member. (i) Whether the impugned Business Auxiliary service of promotion of market in India for foreign principal made in terms of Article 2 and 3 of the Agreement dated 01/07/2005 amounts to export of service considering Article 286 (1) (b) of the Constitution of India read with Apex decisions in the case of Sate of Kerala and Others vs. The Cochin Coal Company Ltd. - [1961 (12) STC 1 (SC)], Burmah Shell Oil Storage and Distributing Co. of India Ltd. and other vs. Commercial Tax officers and others - [(1960) 11 STC 764 (SC) and the provisions of Export Service Rules, 2005 as well as Circular No. 141/10/2011 - TRU dated 13.5.2011 issued by C B E C issued by C B E C ? (ii) Whether the impugned Business Auxiliary Service of promotion of market in India for foreign principal made in terms of Article 2 and 3 of the Agreement dated 01/07/2005 was delivered outside India and used threat and is immune from levy of service tax as export of service in terms of the provisions of Export Service Rules, 2005 read with Circulars issued by C B E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services such as maximizing the markets for Microsoft products including all local advertising and performing the other activities including dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry, investigating feasibility of new markets for Microsoft retail products and providing other services of marketing nature, etc. Much of this is accomplished by way of identifying the customers regarding marketing of Microsoft products; local advertising; performing other activities including dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry. These services once provided are not capable of being used in a territory other than where they have been provided. In fact most of the time; provision, delivery and use is happening simultaneously. It will be inaccurate to suggest that the above said services provided in India can even be delivered or used in a territory other than where these have been provided because the intended target group of the service provider is the prospective buyer located in India . 44. The word ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act, provided that the tax payer pays Indian Income Tax department withholding taxes on certain remittances made by them abroad. There is no legally binding international treaty in respect of taxation of services which can free non-resident companies from payment of service tax where the provision and exhaustion of the service is on Indian soil . 46. He has also referred to certain provisions of Income Tax Act and based upon the reasoning adopted by learned Member Judicial, has pleaded that there is no ambiguity that legislature in the terms of Export of Services Rules 2005 which clearly intended that service consumed outside India shall be export. Inasmuch as in the present case the market was promoted by the appellant to bring Microsoft products and technical support into India and the ultimate consumption of services was made in India, it has to be held that services was provided in India and would be liable to Service Tax. 47. On the other hand, the appellants have strongly adopted the reasoning of the learned Member (Technical) and have stated that in terms of Export of Services Rules, 2005, the service recipient i.e. the Microsoft Operations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in the case of Paul Merchant is required to be followed. 51. Even otherwise also, I find that the disputed service is the service being provided by the appellant to his principal located in Singapore. The marketing operations done by the appellant in India cannot be said to be at the behest of any Indian customer. The service being provided may or may not result in any sales of the product in Indian soil. The transactions and activities between the appellant and Singapore principal company are the disputed activities. As such, the services are being provided by the appellant to Singapore Recipient company and to be used by them at Singapore, may be for the purpose of the sale of their product in India, have to be held as export of services. 52. Apart from the above, we note that there was identical issue was before the Bench of the Tribunal in the case of Gap International Sourcing (India) Pvt. Ltd. [2014-TIOL-465-CESTAT-Del]. Vide its detailed order and after considering the various decisions of the higher Court as also various circulars issued by the Board, it stand held that services of identifying the Indian customers, for procurement of various goods on behest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side 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 Hon ble Supreme Court in the case of All India Federation of Tax Practitioners [2007 (7) STR 625 (SC) as also the principals of destination based consumption Tax were 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 of Service Rules, 2005, being destination based consumption tax are in accordance with the declaration of law by the Hon ble 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. Files to be placed before original Bench for recording of final majority order. (Pronounced in the open Court on 11.09.2014) (Archana ..... X X X X Extracts X X X X X X X X Extracts X X X X
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