2014 (10) TMI 200 - CESTAT NEW DELHI (LB)

Business auxiliary service - Market promotion in India - Export of services or not - Difference of opinion - majority order - whether the appellant, who is subsidiary company and had entered in the market development agreement with foreign principal located at Singapore is liable to Service tax on the services so rendered by them to its principal company - Held that:- Appellants is admittedly covered under the definition of business auxiliary services. The said services are being provided by the appellant to its principal company, which is located at Singapore - services provided by the agents and some agencies being delivery of money to the intended beneficiary of the customer of the western units abroad, which may be located in India and the services provided being business auxiliary services is also to the western unit who is recipient of services and consumers of services, it has to be held that services were being exported in terms of Export of Services Rule 2005 and not liable to Service Tax.

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.

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 - Business Auxiliary services provided by the assessee to their Singapore parent company was delivered outside India as such was used there and is covered by the provisions of Export of Service Rules and are not liable to Service Tax.

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 (8) TMI 1 - Supreme Court] 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. Having held that services involved were export of services, the same are not liable to be sustained against the appellants - Decided in favour of assessee.