2009 (12) TMI 304 - AT - Service Tax

Export of services- Business Auxiliary Service- The appellants are engaged in promotion of sales of computers and peripherals of M/s. IBM World Trade Corporation USA (IBM USA). The appellants were also engaged in provision of call centre services for its client. These services were classifiable under Business Auxiliary Service (BAS). Held that-Impugned Services to be treated as export of services as per C.B.E.&C. Circular dated 24.02.2009 and contrary view of Commissioner not sustainable. Prima facie appellant not liable to pay service tax. Pre-deposit of over Rs. 9.85 crore as tax and amounts waived. Recovery stayed.

Summary

Issues:
- Whether the impugned activity constitutes export of services?
- Whether the demand of Service tax on call center service is valid?
- Whether the benefit of the impugned services accrued outside India?
- Whether the Circular issued by CBEC supports the claim of export of services?
- Whether the appellants are liable to pay Service tax, interest, and penalty?

Analysis:

Issue 1:
The appellants contended that the impugned activity constituted export of services, while the Commissioner found otherwise. The Commissioner held that the services provided by the appellants did not constitute export of services as per the relevant rules. He also rejected the contention regarding the show cause notice and demand raised. The appellants challenged the impugned order on various grounds, arguing that the order did not provide a rational finding to treat the services as exports. They relied on judicial authorities to support their claim that an order containing a finding without appropriate proposals in the show cause notice was not sustainable.

Issue 2:
The appellants argued that the demand of Service tax on call center service was not valid in law. They contended that the call center services were wrongly classified under Business Auxiliary Service (BAS) and that the impugned order did not address the taxability of Business Transformation Outsourcing (BTO) services. They highlighted that the demand of Service tax on call center service was not sustainable and was bad in law.

Issue 3:
The appellants demonstrated that the benefit of the impugned services rendered accrued to IBM, USA, satisfying the conditions for export of services as per the Circular issued by CBEC. They emphasized that the Circular clarified that services provided from India but used outside India qualified as exports. The Tribunal concurred that the benefit of the services accrued outside India, supporting the claim of export of services by the appellants.

Issue 4:
The Circular issued by CBEC was crucial in determining the export status of the services provided by the appellants. The Circular clarified the conditions under which services provided from India but used outside India would qualify as exports. The Tribunal upheld the appellants' argument by referencing the relevant portions of the Circular and emphasizing the importance of interpreting the term 'used outside India' in the context of the specific category of services provided.

Issue 5:
After careful consideration of the case records and rival submissions, the Tribunal analyzed the legal principles and precedents cited by both parties. The Tribunal observed that the services provided by the appellants benefited the foreign client, and in line with the Circular issued by CBEC, the impugned services should be treated as exports. The Tribunal highlighted that the benefit of the services accrued outside India, aligning with the Circular's provisions and the legal principles governing the export of services.

In conclusion, the Tribunal found in favor of the appellants, ruling that the impugned services constituted exports, and the appellants were not liable to pay Service tax, interest, or penalty. The Tribunal ordered the waiver of pre-deposit and stay of recovery of dues pending the decision in the appeal.