TMI Blog2012 (12) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the judgment of Jetlite (India) Ltd., (supra) is not applicable to the facts of this case and the demands are rightly confirmed under the category of Business Auxilliary Service and the extended period of limitation has rightly been invoked. - ST/07 and 10/2010-Mum - M/606 & 607/2012/CSTB/C-I - Dated:- 20-6-2012 - Shri Ashok Jindal and P R Chandrasekharan, JJ. Appellants Rep by: Shri J H Motwani, Adv. and Shri Darshan Boram Adv. Technologies for Datamini Technologies Respondent Rep by: Shri. M H Patiil, Adv. Shri A N Sharma, Commissioner (A.R.) for M/s. Zenith Computers Ltd. Per Ashok Jindal: The appellants namely M/s. Datamini Technologies India Ltd. (Datamini in short) and M/s. Zenith Computers Ltd. (Zenith in short) are in appeals against the impugned orders for demanding service tax along with interest and various penalties. As the issue involved is common in both the cases therefore, both the appeals are taken up together for disposal. 2. The facts of the cases are that intelligence was gathered by the officer of DGCEI that the appellants are engaged in brand promotion of INTEL' and MICROSOFT' for which commercial considerations were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 65(19) read with Section 65(105)(zzb) and the same has become taxable under Brand Promotion Service' w.e.f. 1.7.2010 under Section 65(105)(zzzzq) of Finance Act, 1994. The said judgment although has been appealed against by the Department before Hon'ble Supreme Court (Order dated 8.9.2011 in Civil Appeal D.No.17877 of 2011) but stay has not been granted. (D) When a new entry is introduced covering a particular activity without amending the earlier entry, it cannot be said that earlier entry covered the subsequently introduced entry, based on the following judgments: 1. Indian National Shipowners' Association 2009 (14) STR 289 (Bom.) 1a. Upheld by SC 2011 (21) STR 3 (SC) 2. Cameo Corporation Services Ltd. -2008 (11) STR 161(Tri-Che.) 3. CCE v. Trumac Engg. Co. Pvt. Ltd. -2008 (10) STR 148 (Tri-Ahmd) 4. Glaxo Smithkline Pharmaceuticals Ltd. - 2005 (188) ELT 171 (Tri-Mum) 5.1 IBM India 2010 (17) STR 317 (T) 5.2 Upheld by Supreme Court - 2010 (18) STR J-137 (SC) (E) that the main purpose is to advertise Computers and inserting brands of Intel and Microsoft is just incidental, to the said main purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication No. 6/99-S.T. dt. 9.4.1999 rescinded through Notfn. No.2/2003-S.T. dt. 1.3.2003 3. For the period 1.3.2003to 19.11.2003: Clarification by Board that export of services continue to remain tax free even after withdrawal of Notfn.6/99-ST C.B.E.C. Cir. No.56/5/2003-S.T. dt. 25.4.2003 2003 (154) ELT T-25 4. For the period 20.11.2003 to 15.3.2005: Notfn. No.21/2003- S.T. dt 20.11.2003 2003 (158) ELT N-25 5. Notfn. No.21/2003-ST dt.20.11.2003 rescinded through Notfn. No.10/2005-ST dt. 3.3.2005 2005 (181) ELT N-81 6. For the period 15.3.2005 to 16.6.2005: Export of Services Rules, 2005 [Notfn.9/2005-ST dt 3.3.2005] 2005 (181) ELT N-79 7. For the period 16.6.2005 to 18.4.2006: Export of Services Rules, 2005 [ amended by Notfn. 28/2005-ST dt. 7.6.2005] 8. For the period 19.4.2006 to 1.3.007: Export of Services Rules, 2005 [Notfn.13/2006-ST dt. 19.4.2006] 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of the say that the services could not be treated as export, Ld. AR relies upon the Tribunal judgment in Microsoft Corpn. (I) (P) Ltd. [2009 (15) STR 680 (Tri)] Microsoft Corpn. India Ltd. [2009 (16) STR 545 (Del)]. To substantiate that the services would be covered under Business Auxiliary Service', Ld. AR relies upon the following Circulars: a) Govt. of India D.O.F. No.334/1/2008 TRU dtd. 29.2.2008 b) Circular NO.59/8/2003 dtd. 20.6.2002 of F.No.B3/7/2003-TRU 4.2 In rejoinder, it was submitted on behalf of Appellants that the judgments in the case of Microsoft Corpn. India Ltd. are interim orders and would not have binding precedence. In the present case, the benefit of service since has flown to overseas party it is export of service, based on various judgments and CBEC instructions. 4.3 The decision of Supreme Court judgment in All India Fedn. Of Tax Practitioners [2007 (7) STR 625 (SC)] would not be relevant to the case on hand, as vires of levy of service tax was under challenge and export in general was discussed. When the term export' has been given specific meaning under Export of Service Rules, taking recourse t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dresses for the inquiry, etc, in the advertisement(s) were of the Appellant and not of Intel and/or Microsoft and the same was for solely selling the Computer manufactured by the Appellant. - It is not the case of the department that the Appellant was charging an amount over and above the invoice price of the Computer for the products of Intel/Microsoft; - Intel/Microsoft logos used only to enhance value of DATAMINI' computers - No liability under Business Auxiliary Services' as no service was provided by the Appellant to Intel/Microsoft. - It is submitted that demand under Business Auxiliary Service can be confirmed only if the Appellant is promoting sale of goods or marketing the sale of goods or selling the goods produced or provided by or belonging to the Intel and Microsoft. As stated above the Appellant is neither promoting, marketing or selling the goods Intel/Microsoft as the advertisement is for the sale of he computers manufactured by them and therefore no service is provided by the Appellant and in the event the same will not fall under the taxable category of Business Auxiliary Service. - Only services in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Settled law that the charge created by introducing a new entry and consequently taxability thereupon, the question of imposing the duty retrospectively does not arise. 5.3 Reliance placed on the Judgments of Microsoft Corporation (India) Pvt. Ltd. v. Commissioner 2009 (16) S.T.R. 545 (Del.) and All India Fed. Of Tax Practitioners v. Union of India 2007 (7) S.T.R. 625 (S.C.) erroneous It is submitted that the Reliance place by the Learned DR on the Judgment passed by the Hon'ble Delhi High Court in the case of Microsoft Corporation (India) Pvt. Ltd. v. Commissioner 2008 (16) S.T.R. 545 (Del.) is erroneous as same is an interim order. It is submitted that the Larger Bench of the Hon'ble Appellate Tribunal in the case of Surya Roshni Ltd. v. Commissioner 2010 (260) E.L.T. 417 (Tribunal LB) has held that interim order deciding a stay application cannot have the effect of binding precedent; In any event the issue in the case of Microsoft (supra) has not attained finality as the same is pending before the Hon'ble Third Member. It is further submitted that reliance cannot be place on the Judgment of the Hon'ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular No.111/5/2009 ST dated 24 th February, 2009 which clarifies that the phrase used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Reference is also made to Circular No.141/10/2011-TRU, dated 13-5-2011. - For all the different periods set out above, the beneficial enjoyment of the services was always outside India and the services allegedly provided to Intel' at all times was an export of services'. ABS India vs. CST, Bangalore [2009 (13) STR (65) Tri-Bang] Blue Star vs. CCE, Bangalore [2008 (11) STR (23) Tri-Bang] Lenovo (India) Pvt. Ltd. vs. CCEx, Bangalore [2010 (20) S.T.R. 66 (Tri-Bang.)] Muthoot Fincorp Ltd. v. Commissioner 2010 (17) S.T.R. 303 (Tribunal) - In any event it is submitted that payment received in Indian Rupees from an Indian entity who had in turn received consideration in foreign currency has to be treated as receipt in foreign currency only. Reliance is placed on the following decisions of this Hon'ble Tribunal: - National Engg. Industries Ltd. Vs. Commr. Of C.Ex. [2008(11) S.T.R. 156 (Tri-Del.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax. - Reliance is placed on: - C.C.Ex. Aurangabad vs. Balakrishna Industries (2006) (201) ELT325 (SC) - Godrej Soaps vs. C.C.Ex. reported in 2004(174) ELT 25 (Tri-LB) - Tamil Nadu Housing Board vs. CCE reported in [1994(74) ELT 9 (SC)] - Hindustan Steeel Ltd v. State of Orissa reported in [1978 (2) ELT 159 (SC)] - CC.Ex. vs. HMM Ltd reported in 1995 (76) ELT 497(SC) - There can be no levy of penalty in terms of both Section 76 and Section 78. - Appellant is entitled to the benefit of Section 80. Reliance is placed on ETA Engineering Ltd. vs. Commr. Of C.Ex reported in 2006 (3) S.T.R. 429 = (2004-TIOL-959-CESTAT-DEL-LB). 6. The learned Commissioner (A.R.) appearing for the Revenue reiterated the findings in the impugned order and strongly opposed the contentions of the learned Counsels. He submitted that in both the cases as the issue involved is common, therefore his arguments should be considered for both the cases. He further submitted that both the appellants have entered into an agreement with INTEL' and MICROSOFT' and the activity carried out by them has a wider coverage than mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to improve end customer experience by improving product quality and customer support as well as promoting Microsoft Technologies. - In consideration of company's successful completion and accomplishment of the agreed milestones activities, Microsoft will offer company an agreed amount for Market Development Activities as stipulated in term of the agreement. - In exihibit-D of the agreement for various activities payment have been indicated which are given to parties due to their contribution to the Market Developmental Activities (MDA). - Any payment from Microsoft to participant under this agreement shall be inclusive of all cost/expenses/charges/service taxes and other levies that may be payable or incurred by participants. (This implies clearly that parties are receiving Service Tax also as reimbursement and once received it is their duty to deposit the tax with the Government. 6.3 He further submitted that the advertisement given in newspapers indicates that the appellants are engaged in promotional and marketing activities of the brand of various products of INTEL and Microsoft. 6.4 He further submitted that the remuneration received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities for branded Qualifying Licensee Products. Further in para 15 and para 15.1 of the show-cause notice concluded the allegation that why the service rendered by INTEL and MICROSOFT viz. promotion of INTEL Inside brand and MICROSOFT technologies should not be treated as taxable services under the category of Business Auxiliary Service' under Section 65 (105)(zzb) as amended from time to time. From the allegation leveled against the appellant in the show-cause notice clearly implicit that the appellants are promoting the INTEL INSIDE brand and MICROSOFT technologies brand. 7.2 First we have to see whether the activity of promotion of brad is covered under Business Auxiliary Service' or not. Section 65(19) of the Finance Act, 1994 defines Business Auxiliary Service' means (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the clilent; (iv) procurement of goods or services, which are inputs for the client; or (Explanation For the removal of doubts, it is he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness activity of Sahara Corporation in relation to housing and real estate projects was sought to be promoted and publicized by printing logo of Sahara Corporation on the air tickets, boarding passes, baggage tags and publicity materials and advertisement in newspaper holding etc. in consideration of the payment assured and paid by Sahara Corporation to the service provider. It was further held that the publicity agreed upon and provided by Jetlite (India) Ltd. and their predecessors of Sahara Airlines Ltd. resulted into brand building of Sahara Corporation which promoted marketability of the services provided by Sahara Corporation by creating awareness by building brand value of the group. It was held in the impugned order that Jetlite (India) Ltd. failed to produce any evidence to show as to how they had bona fide belief that the services provided by them to promote the business and area operation to Sahara Corporation was not taxable under the category of Business Auxiliary Services'. In that case, it was contended on behalf of the appellant that the activity undertaken by them was at the most covered under entry brand promotion. Therefore, the issue was whether the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or promoting/marketing or sale of the goods manufactured by the Intel/Microsoft. 10. Moreover, we further observe in the advertisements placed before us that the advertisements show the features of the computers to be sold by them but does not the feature of the products of INTEL/MICROSOFT. If the activity of advertisement of the brand of INTEL/MICROSOFT is sought to be taxed during the relevant period was the Advertisement Service', on which the service tax has already been discharged. 11. Therefore, as alleged in the show-cause notice that the appellants are engaged in the activity of promoting the brand of intel/Microsoft and in the light of the judgment of Jetlite (India) Ltd. (supra) which squarely applicable to the fact of these cases, we hold that the activity of the appellants during impugned period is not covered under Business Auxiliary Service'. 13. As the appellants succeeds on the issue that their activity does not cover under Business Auxiliary Service', we are not going into other issues. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any. Per: P R Chandrasekharan: 14. I have carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support from INTEL MICROSOFT. That these amounts were not paid to them at the time of purchase from INTEL MICROSOFT but it accrued in the account of Datamini; that when it (Datamini) advertised its products, it incurred its expenses; that as per the said agreement, the amount spent for the advertisement was being paid to it by INTEL MICROSOFT; ..that the product being promoted and sold through the said Market Development activities was its product DATAMINI brand of computers; that INTEL MICROSOFT logo only indicated that the Central Processing unit/Operating System used as one of the components in the DATAMINI system. (emphasis supplied) 15.3 Similarly in para 3.2.1 of the notice, there is a narration of the statement given by Mr. P.Ahuja, Director of M/s Datamini Technologies and it is stated as follows:- On being shown a copy of Intel Inside Program terms and Conditions Track 2, submitted by DATAMINI under letter dated 3-7-06 and on being asked whether the said intel program objectives mentioned in the said Terms and Conditions were being fulfilled by DATAMINI, viz. to positively promote the intel inside brand and to encourage demand creation activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort related to DATAMINI prominently messaging on support page of DATAMINI'S website, viz., COMPANY provides service pack support for all PCs that ship with Windows XP and visit www.microsoft.com/genuine to check if your windows is genuine. (iii) Windows Tagline which requires running at least two print advertisements in a daily newspaper for DATAMINI Desktop PC systems and/or Laptop/Notebook PCs preloaded with Windows XP and it is laid down that the advertisement must not contain any Desktop and/or Laptop/Notebook PC configuration that are preloaded with an operating system that is not Microsoft Windows XP . 15.6 The notice further notes in para 5.2 that The three key marketing requirements specified are proper usage of genuine Windows assurance statement, a minimum of 30% Microsoft content share in all demand generation and market development activities and proper usage of logo/visual elements such as Designated for Windows' logo, Microsoft Certified' and Gold Certified Partner' logos. Market Development activities are defined as marketing activities such as consumer events, sponsorships and offers that support the sale of computer systems preinst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Windows XP software of MICROSOFT. Technologies by putting the logo/brand name of the aforesaid companies in the advertisements of their product, namely, Datamini computers, and, therefore, the said activity comes within the ambit of service tax under the category of Business Auxiliary Services . Any reading/understanding of the showcause notice in any other way, would be completely untrue and incorrect. 15.11 Now let us see how the noticee understood the issues covered in the show cause notice. In their reply to the show cause vide reply dated 4 th May, 2007, the noticee, M/s Datamini has restated the factual background as follows:- 1.3 The notice has entered into an agreement with Intel, the purpose of which agreement is to encourage demand creation activities for the branded qualifying licencee products (products of the notice) and also to promote the Intel inside brand. Under such agreement the qualified licensed products are computer products exclusively based on (1) Qualifying Intel Processors (OLPs) and other products specified by Intel that are listed on the Licencee's QLP list. In terms of such agreement, for satisfying the eligibility criteria, the noticee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Datamini brand of computers and the Intel and Microsoft logos only indicated that the CPU and the Operating System of such companies was used as one of the components in the Datamini system....................... while advertising their own products, the logos of Intel and Microsoft wer advertised as the products of Intel and Microsoft namely, the CPU and software respectively. 15.12 In para 2.2 of the reply to the show cause notice, as regards the allegation in the show cause notice, the noticee has stated as follows: 2.2. It has been alleged that the services provided by the Noticee, that of promoting the INTEL Inside brand and to en courage demand creation activities for branded Qualified Licencee products that are based exclusively on Qualifying Intel Processors for INTEL and similarly, that of promoting Microsoft technologies for MICROSOFT, under respective agreements amounted to a taxable service as defined under the Finance Act 1994. In their submissions against the charge in the show cause notice, it has been stated as follows in para 4.4.3: 4.4.3 ..The Noticee submits that it does not provide any services in relation to promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.14 Now let us see, how the adjudicating authority understood the issues in contention. Part 4 of the order deals with the discussion and findings of the adjudicating authority. In para 04.04, the adjudicating authority has recorded his findings as follows:- From activities mentioned in column 3 of the above able, it is clearly seen that the notices, M/s. Datamini have undertaken promotional and marketing activities for the products of M/s Intel M/s. Microsoft. The Noticees have entered into the agreements with these companies and have been rendering the services in relation to promotion or marketing the goods, viz, microprocessors for Intel and Operating Systems Software like Windows XP for Microsoft. In para 04.06 the adjudicating further observes as follows:- The Noticee's conclusion in para 4.4.4 of their reply dated 04-05-07, to the Notice, thus from a reading of the Agreements and the Guidelines referred above, it appears that the purpose of both the Microsoft and the Intel programs are only to promote the demand for the products of the Noticees (Datamini computers), I far from reality. In fact both the programs of Intel Microsoft have been de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Intel Inside /Microsoft and therefore, the activities undertaken by the appellants will not come under the purview of Business Auxiliary Service . 15.18 If the investigating agency which issued the show cause notice (DGCEI in this case) understood the scope of the notice in a particular way, the notices thereto also understood the issue in the same way and replied to the show cause notice based on the said understanding and the adjudicating authority also understood the issued involved in the same way and passed the order, it is incomprehensible how and why this Tribunal should interpret the show cause notice and the issued involved therein in an altogether different way. Such a reading of the show cause notice, in my considered view, would be contrary to the fcts o nrecord and border on half-truths/untruths. If a show cause notice is read in bits and pieces and conclusions are drawn based on such a reading, it would only lead to absurd and perverse conclusions. As the final fact finding authority, this tribunal has a greater responsibility in ascertaining the correct facts and then apply the law to the facts. The Tribunal might go wrong in the interpretation of law, but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall mean Qualifying Licensee Products that meet the Intel criteria for an extended ingredient brand and that meets the requirements set forth in the Intel Terms Conditions to enable the use and/or display of a Platform Logo. 1.12 Platform Logo shall mean a logo to use solely with Platform compliant QLP. 1.12 Platform Logo shall mean the Intel Inside trade mark Logo incorporating the name, mark, and/or brand of a Qualifying Intel Processor. 1.14 Qualifying Intel Processor shall mean processors eligible for purchase accruals and reimbursement pursuant to the Intel Inside terms and Condition manufactured by Intel and bearing their Original Inter branding and factory markings as set forth in Attachment B to this Agreement as may be updated by Intel from time to time. Processors manufactured by a party other than Intel, counterfeit processors, and/or Intel processors that have had their branding, speed designations or other factory markings altered (remarked) by any party other than Intel (collectively Noncompliant Processors ) are not Qualifying Intel Processors. 1.15 Qualifying Licensee Products ( QLP ) shall mean Computer Products at the Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncrease or decrease depending on the Licensee's purchases, sales, integration rate, discounts, or transfers of eligible QIPs and on the Licensee's reimbursement activity. MDF are utilized when claims are approved. .. 3.1 Advertising through Intel Inside Program This program is intended to reimburse Licensees for advertisements they have placed and are obligated to pay for, that prominently and positively feature QLPs along with Intel Inside Logos. .. 4.1 Qualifying Licensee Products The program is intended to reimburse Licensees for advertisements that prominently feature QLPs along with Intel Inside Logos. QLPs are fully integrated and functional computer products that are based exclusively on Qualifying Intel Processors(QIPs). 16.4 The agreement further stipulates conditions as to how the advertisements for the QLPs containing QIPs would be placed in various media and the contents of such advertisements. The reimbursement claims will be made directly to the Licencee via check, wire transfer or electronic funds transfer, with Intel paying the wire transfer bank fees. The ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or installer of software on computer systems. Windows or Microsoft Windows means window XP Professional, windows XP Home Edition and Windows XP Media Centre Edition. The expectation from the Participant as per clause 3.1 of the Agreement is as follows:- 3.1 Minimum activity under the Program Company shall implement at least two activities from the six milestone activities listed in Exhibit D hereof, during the Term of the Program in order to avail the MDA. Company shall inform before the commencement of the Program clearly stating the two milestone activities that it chooses to undertake during the Program. Exhibit D which lists out the Milestone activities and the Payout for the activities reads as follows:- EXHIBIT D In consideration of Company's successful achievement of the following milestone activities, Microsoft will offer Company7 a fixed amount per Window Licence (COEM product purchased from an Authorized Distributor) for market development activities stipulate below: SL. NO Activity Description Payout/Unit Windows XP Professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laptop/Notebook PCs manufactured and shipped out of the COMPANY factory premises 100 50 Total payout (supplied) 425 275 It is further stipulated that to be eligible for the Program- Minimum Windows BOS Units (Windows XCP Professional Windows XP home and Windows XP Media Centre Edition only) to be purchased from an authorized Microsoft OEM product distributor during the offering period (April 1 June 30, 2006) : 2000 units The computation of the Payout is also explained in the Agreement as follows:- First Payout will be on Windows XP Home/MCE units followed by Windows XP Professional. For eg. If the target is 100 units and the actual achievement is 150 units, e.g. 150% achievement to target; the payout will be capped at 130% (i.e. 130 units). Assuming that the actual achievement was broken up as 100 units of Windows XP Professional and 50 units of Windows XP Home, then the first payout will be calculated as 50X275+80X425= INR 47750 (Payout assumes that all of the milestone activities have been fulfilled) 16.9 From the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el logo which contains the words Pentium D inside TM . Features in respect of Model 302 B interalia mentions the following. Intel Pentium D Processor 925 with Dual Core Processing (2MB x 2 Cache, 3.0 GHz, 800 MHz FSB) . 16.11 From these advertisements placed by the appellant, it is crystal clear that what is being promoted through these advertisements are goods/services of INTEL MICROSOFT and not logos/brand names. 17. The next question to be answered is whether the activity undertaken by the appellants comes within the purview of Business Auxiliary Service as defined in the Finance Act, 1994. The definition of Business Auxiliary Service brought under the service tax net vide the Finance Act, 2003 reads as any service in relation to- (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or (iii) any customer care service provided on behalf of the client; or (iv) any incidental or auxiliary support service such as billing, collection or recovery of cheques, accounts and remittance, evaluation of prospective customer and public rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ringing the activity of promotion of brand of goods etc., the Ministry of Finance vide budget instructions date 26 th February 2010 (F.No.334/1/2010-TRU) clarified as follows:- 4.2 It is pertinent to note that promotion or marketing of sale of goods produced, provided or belonging to a client and promotion or marketing of services provided by the client are already covered under Business Auxiliary Services (BAS). Such activities would continue to remain classified under BAS. The difference between the services classifiable under BAS and the newly proposed service is that the latter has a wider coverage in the sense that mere promotion of a brand would attract tax under this service even if such promotions can not be directly linked promotion of a particular product or service. Many companies/corporate houses (for example Sahara, ITC or Tatas) are associated with a range of activities including production/marketing/sale of goods, provision of services, holding of events, undertaking social activities, etc. If the brand name/housemark etc, is promoted by a celebrity without reference to any specific product or services etc., it is difficult to classify it under CAS. Such acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r specified in clause 9a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable; (c) When a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub clauses which equally merits consideration; 17.8 If we follow the above principles of classification the service which provides a more specific description should be preferred over that giving a general description. As discussed, Business Auxiliary service which relates to promotion/marketing of goods or service belonging to the client is more specific in the instant case than the promotion of brand. Even if it is assumed, for argument sake, that both services are equally applicable, then earlier the better principle' envisaged in clause(c) of sub-section (2) would apply. In the instant case, the Business Auxiliary Service came into the tax net first in 2003 when compared to the brand promotion service which was brought under the tax net only in 2010. Thus if one follows the principle of classification enunciated in section 65A, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng thereby Indian Rupees. In other words, the consideration for the service rendered is computed in Indian Rupees. The Revenue has brought on record photocopies of a few of the cheques issued by the service recipient (Microsoft Corporation India Pvt. Ltd.) to the appellant towards payment of consideration for the services rendered. The consideration (amounts) is indicated in Indian Rupees. In other words, payment is not received inconvertible foreign currency. These facts, which are not disputed, make it abundantly clear that the transaction involved is a domestic transaction and not exports. Therefore, the argument advanced that the transactions are export transactions is laid hollow by the facts available on record. Consequently, the judgments relied in support of the above contention also become totally irrelevant. Therefore, as far as the transactions with MICROSOFT are concerned, the benefit of exemption from tax available to export of services will not apply at all and I hold accordingly. 18.2 With regard to the services rendered to M/s INTEL, the agreement has been entered into with M.s Intel Corporation, USA. However INTEL has offices in India as mentioned in para 18 abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.13/2006-ST dated 19-4-06 which remained in force till 22-5-07. As per the amended provisions, to be considered as export of service, two conditions had to be satisfied, namely, (a) such service is delivered outside India and used outside India; and (b) payment for such service provided outside India is received by the service provider in convertible foreign exchange. 18.5 The rule was further amended by notification 30/2007-ST dated 22-5-07, the conditions relating to export of service further underwent a change and the rule stipulated new conditions, as under; (a) such service is provided from India and used outside India; and (b) payment for such service is received by the service provider in convertible foreign exchange. 18.6 Thus the position which obtains for export of service is that the order for rendering the service should have originated from outside India. This conditions is satisfied since as per the agreement, the service recipient is Intel Corporation, USA. As regards the second condition, during 15-3-05 to 18-4-06, the service should have been delivered outside India and used in business outside India. Business auxiliary service which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in this regard, it is difficult to accept the claim of the appellant that they have received the payment in convertible foreign exchange and therefore, they are eligible for the aforesaid exemption. 18.9 The appellants have relied on the decisions of this Tribunal in the case of Nipuna Services and Shelpan Export in support of their contention that the transactions amounted to exports. We have perused the facts of those cases. In those cases there was clear evidence led by the service providers about raising the bill in foreign currency and receipt of the proceeds in foreign currency which was converted into Indian currency at the time of crediting the proceeds to the service providers. In the case before us, no such evidence has been adduced by the appellants. Therefore, the decisions of those cases can not be applied to the facts of the present case. 18.10. 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). This Agreement recognized four modes of delivery of services in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services. Property based services cover service providers such as architects, interior designers real estate agents, construction services, mandapwalas, etc. Performance based service are services provided by service providers like stock brokers, practicing chartered accountants, practicing cost accountants, security agencies, tour operators, event managers, travel agents etc. 11. At this stage, we may state that the above discussion shows that what was the economic concept, that there is no distinction between consumption of goods and consumption of services is translated into a legal principle of taxation by the aforesaid Finance Acts of 1994 and 1998. 18.14. 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 is promotion/marketing of the goods of the client in India by placing advertisements in the media. Such an activity is rendered in India and hence leviable to service tax. 18.15. The CBEC had clarified the position relating to applicability of the provisions of the Export o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the audience though actually the benefit may finally accrue to the buyer who is located at another place. 4. 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 facts available should interalia clearly indicate that only the payment has been received from abroad and the services have been used in India. 18.16. The above clarification makes it very clear that to be considered as used outside India , the effective use and enjoyment should be outside India. In the case of promotion/marketing of goods/services in India, which promotes the business in India of the client (who is located outside India), can it be said that the effective use and enjoyment is outside India. In my considered view such an interpretation would be totally irrational and illogical. 18.17. The appellants have contended that the demands are barred by limitation of time in as much as the show cause notices have been issued by invoking the extended period of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t clarifications either from the department or any from any experts in the field. No such evidence is forthcoming from the records before us. The appellants are professionally managed Corporates and it is inconceivable that they did not ascertain their service tax liability from any one in spite of the service agreements entered into with their clients specifically provided for service tax liability on the appellants. In these circumstances, the argument of bonafide belief can not be entertained at all and it is purely an afterthought. Accordingly, there is absolutely no infirmity in invoking the extended period of time for demand of service tax in the instant case and I hold accordingly. 19. The last issue for consideration relates to imposition of penalty on the appellants. 19.1 The learned Commissioner has imposed a penalty under Section 75A of the Finance Act, for failure to obtain registration; under Section 76 for the default in payment of service tax; under Section 77 for non-filing of the service tax returns and a penalty equal to the service tax confirmed under Section 78 for non-payment of service tax on account of fraud, collusion, suppression of facts, etc. Imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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