TMI Blog2009 (12) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants :— (i) Service Tax of Rs. 15,11,26,201. (ii) Applicable interest under section 75 of the Finance Act, 1994 (the Act). (iii) Penalty at the rate of Rs. 200 for every day during which the default continued and at the rate of Rs. 200 per day or 2 per cent of such tax per month whichever is higher under section 76 of the Act; and (iv) Penalty of Rs. 15,11,26,201 under section 78 of the Act. 2. The application is for waiver of pre-deposit of the above dues. The facts of the case are that the appellant was engaged by M/s. IBM World Trade Corporation, USA (IBM, USA) for marketing/sales/procurement of orders to promote sale of computer systems and peripherals of IBM, USA in India. The appellants also rendered call centre services to IBM, USA. The appellants received commission for the above activities which are subject to service tax under the category 'Business Auxiliary Services' (BAS) classified under section 65(19) of the Finance Act, 1994. The material period is from October, 2006 to March, 2007. The appellants have challenged the impugned order on various grounds; the main ground being that the impugned services had been exported and were not subject to tax as he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enying it the status of 'export' was incorrect. 4. They relied on the following decisions to support the claim that the impugned services were 'export of service' : (i) Blue Star Ltd. v. CCE [2009] 18 STT 34 (Bang. - CESTAT). (ii) ABS India Ltd. v. CST [2008] 17 STT 223 (Trib. - Bang.). (iii) Lenovo India (P.) Ltd. v. CCE [2009] 21 STT 134 (Bang. - CESTAT). (iv) Worldspace India (P.) Ltd. v. CST [Stay Order No. 402 (Bang.) of 2009, dated 20-3-2009]. 5. We have carefully considered the case records and the rival submissions. The Ld. Counsel for the appellants reiterated the grounds raised in the appeal. Ld. JCDR submitted that the provision of service was the taxable event which had taken place in India. In the light of the ratio of the Apex Court's judgment in the case of All India Federation of Tax Practitioners v. Union of India [2007] 10 STT 166 provision of services in the instant case was in India and service tax was correctly demanded. She relied on a stay order of the Tribunal in the case of Microsoft Corpn. (I) (P.) Ltd. v. CST [2009] 22 STT 201 (New Delhi - CESTAT) affirmed by the Hon'ble High Court of Delhi. The Tribunal had found that the CBEC Circular No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve that the scope of Export of Services Rules, 2005 were clarified by the CBEC in the Circular No. 111/05/09 ST, dated 24-2-2009. The material portion of the Circular is reproduced below :— "In terms of rule 3(2)(a) of the Export of Services Rules, 2005, a taxable service shall be treated as export of service if "such service is provided from India and used outside India". Instances have come to notice that certain activities, illustrations of which are given below, are denied the benefit of export of services and the refund of service tax under rule 5 of the Cenvat Credit Rules, 2004 [Notification No. 5/2006-C.E. (NT.), dated 14-3-2006] on the ground that these activities do not satisfy the condition 'used outside India',— (i) Call centres engaged by foreign companies who attend to calls from customers or prospective customers from all around the world including from India; (ii) Medical transcription where the case history of a patient as dictated by the doctor abroad is typed out in India and forwarded back to him; (iii) Indian agents who undertake marketing in India of goods of a foreign seller. In this case, the agent undertakes all activities within India and receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... islation. Keeping this principle in view, the meaning of the term 'used outside India' has to be understood in the context of the characteristics of a particular category of service as mentioned in sub-rule (1) of rule 3. For example, under Architect service (a Category I service [Rule 3(1)(i)]), even if an Indian architect prepares a design sitting in India for a property located in U.K. and hands it over to the owner of such property having his business and residence in India, it would have to be presumed that service has been used outside India. Similarly, if an Indian event manager (a Category II service [Rule 3(1)(ii)]) arranges a seminar for an Indian company in U.K. the service has to be treated to have been used outside India because the place of performance is U.K. even though the benefit of such a seminar may flow back to the employees serving the company in India. For the services that fall under Category III [Rule 3(1)(iii)], the relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for Categ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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