TMI Blog2012 (8) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ard, the assessee has a prima facie, case for waiver of pre-deposit of dues adjudged for the period 01/07/2003 to 19/11/2003. From the period from 15/03/2005 onwards as per Export of Service Rules, 2005 that a taxable service shall be treated as ‘export of service' only if such service so ordered is delivered outside India and used in business outside India & in the instant case, the service of promotion of marketing of goods manufactured by the supplier has taken place in India and the said service is for the purpose promoting the business of the foreign manufacturer in India, thus the activity does not come within the scope of export of service during the period from 15/03/2005 to 18/04/2006. From the period from 19/04/2006 to 28/03/2007 though the condition of receipt of payment in convertible foreign exchange is satisfied, the conditions relating to delivery of service outside India and the use of the service outside India are not satisfied because the promotional activity undertaken by the service provider is in India and it can be used only in promoting the business in India. Therefore, the use of service is not outside India. The same position will prevail during the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. VIASYS. After going through the various provisions of the agreement entered into by the appellant with VIASYS and also recording the statements of the officials of the appellant, a show cause notice dated 01/09/2008 was issued classifying the service rendered by the appellant M/s. Life Care to M/s. VIASYS as Business Auxilliary Services' under the provisions of Section 65(19) read with Section 65(105)(zzb) of the Finance Act,1994 and demanding service amount of Rs.55,21,954/- for the period from 01/07/2003 to 19/11/2003, 18/03/2005 to 02/03/2006, 02/05/2006 to 25/04/2007 and 30/07/2007 to 05/12/2007. Interest on the said amount was also demanded. It was also proposed to impose penalty on the appellant under Section 76,77 and 78 of the Finance Act, 1994 and also to deny benefit of exemption Notification No.13/2003 dated 20/06/2003 and under the Export of Service Rules,2005. The said notice was adjudicated vide the impugned order and the demand for service tax was confirmed along with interest thereon under the provisions of Section 73 and 75 of the said Finance Act 1994 respectively. Penalty of Rs.20,000/- was imposed under Section 77 and a penalty equivalent to service tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India so long as the benefit of these services accrue outside India. Since the services rendered by the appellant falls under category (3) and the recipient of the service is M/s. VIASYS, who is located outside India, the services rendered by the appellant amounts to export of services as defined in Export of service Rules, 2005 and, therefore, they are not liable to pay any service tax during the impugned period. As regards the demand of service tax for the period from 01/07/2003 to 19/11/2003 it has been clarified in Board's Circular No. 56/5/2003 dated 25/04/2003 that "Service tax is a destination based consumption tax and it is not applicable on export of services. Export of services would continue to remain tax free even after withdrawal of Notification No. 6/99-ST dated 09/04/1999." 3.3 In view of the above, the activities undertaken by the appellant are not liable to service tax and accordingly he pleads for grant of waiver of pre-deposit of the dues adjudged against the appellant during the pendency of the appeal. 3.4 The learned advocate also relies on the judgment of this Tribunal in the case of Em Jay Engineers vs. Commissioner of Central Excise, Mumbai 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m purchase requirements; 3. to demonstrate the products to the prospective customers and also install such products at the customers' locations and to provide training to the customers for the proper use of such products; 4. to provide its customers with warranties in a prompt and thorough manner and to respond to warranty requests within 24 hours of its initial receipt. 5. to promptly and completely translate all user and technical manuals as well as such advertising and marketing materials as the foreign manufacturer may from time-to-time provide for use in the country for promotion of the products within the territory. From the terms and conditions of the agreement, it is evident that the appellant was undertaking promotion and marketing of the goods manufactured by the foreign manufacturer, M/s. VIASYS International Corporation and also installation services, warranty services, advertising services etc. for the foreign principal. These services can be rendered by the appellant only within the territorial jurisdiction assigned which is in India and by the very nature of the services rendered, it is clear that the services were used within the territory of India. 8. Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India and it can be used only in promoting the business in India. Therefore, the use of service is not outside India. The same position will prevail during the period up to 30/05/2007. Even for the period from 01/06/2007 onwards, the condition relating to service be provided from India and used outside India is not satisfied. Therefore, the demand of service tax for the period 18/03/2005 to 05/12/2007 appears to be prima facie correct in law. 10. The appellant has relied upon a few decisions of this Tribunal. In the case of Em Jay Engineers and Lenovo (India) Pvt. Ltd. (cited supra), the issue pertained to liability to service tax on the commission received for procuring orders in India and forwarding the same to their principals abroad. In that context, it was held that procurement of orders and forwarding the same to their principals abroad amount to delivery of service outside India and therefore, satisfies the definition of export of service' and, hence, no service tax is leviable. As regards SGS India Pvt. Ltd (cited supra) the issue pertained to the period from 01/07/2003 to 19/11/2003 and based on the CBEC Circular cited above, relief was granted. In the instant case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords "Accrual of benefit" are not restricted to mere impact on the bottom-line of the person who pays for the service. If that were the intention it would render the requirement of services being used outside India during period prior to 28-2-2010 infructuous. These words should be given a harmonious interpretation keeping in view that during the period upto 27-2-2010 the explicit condition was provided in the rule that the service should be used outside India. In other words these words may be interpreted in the context where the effective use and enjoyment of the service has been obtained. The effective use and enjoyment of the service will of course depend on the nature of the service. For example effective use of advertising services shall be the place where the advertising material is disseminated to the audience though actually the benefit may finally accrue to the buyer who is located at another place. This however, should not apply to services which are merely performed from India and where the accrual of benefit and their use outside India are not in conflict with each other. In order to establish that the services have not been used outside India, the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1994 and 1998." The above elucidation of the economic concept of service tax by the hon'ble apex court makes it abundantly clear that to make the service activity leviable to tax, the services should be rendered in India. In the instant case, the service rendered is promotion/marketing of the goods of the client in India by rendering various services such as demonstration, installation, after sales warranty and advertising services for which the appellant received a consideration. These activities are rendered in India and their effective use and enjoyment are in India and therefore, the benefit of the services rendered also accrue in India and hence leviable to service tax. 13. The Export of Service Rules owes it origin to General Agreement on Trade and Tariff. In the 8 th round of the GATT (Uruguay Round), negotiations were carried out in the area of services which led to the General Agreement on Trade in Services (GATS) to which India is a signatory. This Agreement recognized four modes of delivery of services in the case of exports. These are 1. Cross Border The service itself crosses the border 2. Consumption Abroad The consumer travels across the border 3. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause relating to "Responsibility for Taxes and Duties" which reads as follows:- "All taxes, now or hereafter with respect to the transaction contemplated hereunder (including value added taxes, sales and use taxes, customs and excise taxes or duties and other similar taxes or duties, but excluding income taxes or other taxes imposed upon Manufacturer and measured by the gross or net income of Manufacturer shall be the responsibility of Distributor, and if paid, or required to be paid by Manufacturer, the amount thereof shall be added to and become part of the amounts payable by Distributor hereunder." The above clause in the agreement itself should have alerted the appellant about their tax liability and they should have taken appropriate steps to ascertain their liability either from the department or from experts on the subject. Further it is on record that the appellant is registered with the Service Tax Department for other services such as maintenance and repair and installation during the relevant period. Therefore, it can not be said that they were ignorant of the provisions of law relating to service tax. The appellant failed to obtain service tax registration unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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