Marketing and support services provided in India on direction of the foreign Company is export of service

[CA Bimal Jain]

The CESTAT, Bangalore in M/S SUN MICROSYSTEMS (I) PVT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, LTU, BANGALORE  - 2023 (9) TMI 647 - CESTAT BANGALORE set aside the demand order passed by the Adjudicating Authority and held that, marketing, sales promotion, and technical pre-sales support service provided by the assessee to Indian customer on the direction of the foreign company tantamount to ‘export of service’.

Facts:

M/s. Sun Microsystems (I) Pvt. Ltd. (“the Appellant”) entered into a Marketing and Warranty support Service Agreement for marketing, sales promotion, and technical pre-sales support services in India with M/s. Sun Micro Systems Pte. Ltd., Singapore (“the foreign company”) on July 01, 1998.

The Revenue Department (“the Respondent") alleged that since the services are rendered in India thus, classifiable under ‘Business Auxiliary Services’ (BAS) and covered under Section 65(19) of the Finance Act, 1994.

The Revenue Department (“the Respondent”) issued a Show Cause Notice for recovery of the service tax payable on the BAS services rendered during the period from March, 2005 to December, 2007 with interest and penalty.

The Adjudicating Authority vide the Order (“the Impugned Order”) confirmed the demand with interest and penalty.

Aggrieved by the Impugned Order the Appellant filed an appeal before the CESTAT, Bangalore.

The Appellant contended that under the Marketing and Warranty support service Agreement the service is provided to foreign company for their furtherance of business.

Issue:

Whether marketing and support services provided by the Indian Company to Indian customer as per agreement with foreign Company can be categorized as an ‘export of service’?

Held:

The CESTAT, Bangalore in M/S SUN MICROSYSTEMS (I) PVT LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, LTU, BANGALORE  - 2023 (9) TMI 647 - CESTAT BANGALORE held as under:

• Relied upon the M/S. ARCELOR MITTAL STAINLESS (I) P. LTD (NOW KNOWN AS M/S. ARCELOR MITTAL DISTRIBUTION SOLUTIONS INDIA PRIVATE LIMITED) VERSUS COMMISSIONER SERVICE TAX MUMBAI-II - 2023 (8) TMI 107 - CESTAT MUMBAI wherein CESTAT, Mumbai held that Arcelor India is the sub-agent of Arcelor France. Arcelor India provides necessary details of the customers in India to the foreign steel mills, thereafter, the foreign steel mills execute a contract for supply of the goods with Indian customer for which the Arcelor India gets commission. Since, the service provided by Arcelor India is delivered and used outside India thus qualifies as export of service.
• Noted that, there is an agreement between the Appellant and the foreign company, as per which the marketing and warranty support services provided by the Appellant in India.
• Further noted that, it is on the request and direction of the foreign company the Appellant carried out the marketing activities in India and for these services that the Appellant gets the consideration from the foreign company in convertible foreign exchange.
• Held that, marketing and other services provided by the Appellant in India on the direction of the foreign company, will be considered as ‘export of service’.
• Set aside the Impugned Order.

(Author can be reached at info@a2ztaxcorp.com)