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2016 (6) TMI 1070 - CESTAT CHANDIGARH

2016 (6) TMI 1070 - CESTAT CHANDIGARH - TMI - Waiver of pre-deposit - Export of services or not - services have been provided by the applicant to their foreign principal located outside India or the services rendered by the applicant on the instruction of their foreign principal to the consumers of services in India - applicant contended that their services qualify under the category of business auxiliary service as well as support services but these services covered under Export of Services Rul .....

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- ST/Stay/50321/2014 in Appeal No. ST/50242/2014-DB - Stay Order No. 11/2016-CHD - Dated:- 16-12-2015 - Mr. Ashok Jindal, Member (Judicial) and Mr. Raju, Member (Technical) Present for the Appellant : Shri Harish Bindumadhavan, Advocate Present for the Respondent : Shri M. R. Sharma, AR ORDER The appellant is seeking waiver of pre-deposit of service tax demand of ₹ 1,40,87,838/- confirmed against them alongwith interest and various penalties under Finance Act, 1994 for the period from Marc .....

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Testing Centres (APTCs); Assistance in delivery of marketing materials and information forms o potential APTCs Organizing attendance at conferences and meetings held by the IT clients; Liasoning with the representatives of the IT clients; Providing ongoing assistance and support to the APTCs in carrying out their testing services on need basis. Prometic I B V negotiates and contracts with APTCs. All costs associated with these services are borne by the associated enterprise. Prometric India doe .....

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the learned Counsel for the applicant is that their services qualify under the category of business auxiliary service as well as support services but these services covered under Export of Services Rules. Therefore, they are not liable to service tax in view of the decision of this Tribunal in the case of Blue Star Limited vs. CCE, Bangalore - 2008-TIOL-716 (Tri.Bang) and GAP International Sourcing (India) Pvt. Ltd. vs. CST, Delhi-2009-TIOL-249-CESTAT-DEL. 4. On the other hand, learned AR reite .....

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principal located outside in India who are actually receiving the services. 7. In the case of Blue Star Limited, this Tribunal has observed as under:- 6. In this case, the appellant is a Distributor/agent of their foreign clients and procuring orders for supply of equipment by the foreign supplier. The appellant has no connection with the buyers in India. In fact he is identifying the buyers for the foreign clients, and the foreign clients are selling equipment to the Indian buyers, on principa .....

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bunal in Paul Merchants Ltd. 2013 (29) STR 257 = 2012-TIOL-1877-CESTAT-DEL wherein the facts of the case are that the person who is located outside India wanted to send money through Western Union in India. Western Union are having Paul Merchants Ltd. as their agent in India who on instructions of Western Union delivered the money to the person located in India. In those set of facts, the Tribunal has examined the issue as observed as under : - the activity of remittance of money by a person abr .....

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with the approval of WU. The role of Agents and sub-agents is that when the intended beneficiary approaches them with the code number and provides the prescribed proof of identify, they handover the money remitted by the sender immediately. Thereafter the Tribunal has observed further in para 68 & 69 as under : - 68. Coming to the question of classification of the activity of agents and sub-agents, their activity essentially is providing of service of delivery of money on behalf of WU .....

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Provision of service on behalf of client and during period prior to 10-9-2004, this activity would be covered by the service rendered by a person as commission agent , who in terms of definition of this term in Notification No. 14/2004-S.T. covered, among others, the person who acts on behalf of another person and causes sale or purchase of goods or provision or receipt of services for a consideration. Though w.e.f. 1-6-2005, services in relation to transfer of money including telegraphic trans .....

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an agency function i.e. providing services on behalf of WU in India for commission and besides this the marketing & promotion of money transfer service of WU, in India, both of which are covered by the definition of Business Auxiliary Service as given in Section 65(19). 69. Next comes the main question whether - (a) the services provided by the agents of WU, and (b) the services provided by the sub-agents appointed by agents, amount to export of service out of India and, hence .....

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; … 70.3 But determining the place of consumption is a complex task on account of intangible nature of services and the different modes by which a service can be provided and can be consumed i.e. used by the recipient to satisfy his needs. The place of consumption and the location i.e. permanent address of the service recipient may be different. A uniform criteria for determining the place of consumption/receipt for different categories of services like, services in relation to immov .....

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termining as to at which place the multi-locational service provider is to be treated as located for the purpose of taxation. Therefore, what constitutes the export of service cannot be left to the deductive capability of individual tax payers or individual tax collectors, as doing so will cause a total chaos. For this reason only, the Export of Services Rules, 2005 have been framed by the Central Government under Section 94(1)(f) of the Finance Act, 1994. A little analysis of these rules will s .....

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company to its client in USA) as consumed at the place where the same have been performed; (b) services in relation to immovable property of a person (e.g. service of insurance of immovable property located abroad, belonging to an Indian resident A provided by an India Insurance Company B) as having been consumed at the place where the immovable property is located; and (c) services in relation to business; (e.g. an Indian Company A providing the services of marketing & sales promotion in I .....

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the Budget of 2012-13 have been replaced by Place of Provision of Service Rules, 2012, the Rule 3 of which states that the place of provision of a service shall be the location of the service recipient, (who is the service consumer). Therefore, in my view, there is nothing in the Export of Services Rules, 2005 which can be said to be contrary to the constitutional provisions of the Apex Court s judgment in the case of All India Federation of Tax Practitioner s Association (supra). 7. Further, t .....

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foreign currency, in terms of the provisions of Rule 3(1)(iii) read with Rule 3(2) of the Export of Services Rules, 2005, the service provided by the agents has to be treated as export of service. … … 72. Next comes the question as to whether the services provided by sub-agents appointed by the agents of WU are export of service and hence not taxable. As held in Para 68 above, the services provided by the sub-agents appointed by the agents is Business Auxiliary Service covere .....

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ts not to WU and therefore, in any case, the commission received by the sub-agents for the services provided by them to agents is chargeable to Service Tax. 8. We further find that a similar issue came up before the Hon ble High Court of Bombay in SGS India P. Ltd. - 2014-TIOL-580-HC-MUM-ST where in the facts are as follows. The appellant was engaged by foreign importers who imported certain goods from India exporters. The foreign parties wanted the appellant to inspect/test/analyse samples of t .....

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tment demanded service tax on this consideration paid by the foreign parties to the appellant. In the said case, this Tribunal - 2011-TIOL-666-CESTAT-MUM held that the services rendered by the appellant were consumed abroad where the appellant s clients used the service of inspection/test/analysis to decide whether the goods intended to be imported by them from India conformed to the requisite specifications and standards. In other words, the benefit of the service accrued to the foreign clients .....

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dia. In other words, the clients abroad were desirous of confirming the fact as to whether the goods imported complied with requisite specifications and standards. Thus, client of the respondent located abroad engaged the services of the respondent for inspection and testing the goods. The goods were tested by the respondents in India. The goods were available or their samples were drawn for such testing and analysis in India. However, the report of such tests and analysis was sent abroad. The c .....

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ax liability. The Tribunal relied upon the circulars issued and prior thereto the view taken by it in the case of KSH International Pvt. Ltd. v. Commissioner and B.A. Research India Ltd. The case of the present respondent was said to be covered by orders in these two cases. To our mind, once the Hon ble Supreme Court has taken the view that Service Tax is a value added tax which in turn is destination based consumption tax in the sense that it taxes non-commercial activities and is not a charge .....

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raise any substantial question of law. 26. We are of the view that any larger or wider controversy and based on the submissions of Shri Sridharan need not be decided in this case. Suffice it to hold that the view taken by the Tribunal does not raise any substantial question of law. The Appeal is devoid of merits and it is accordingly dismissed. 9. In the light of the decision of Paul Merchants Ltd. and SGS India P. Ltd. (supra), we have examined the facts of this case. In this case also, th .....

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appellant during warranty period whereas the appellant who provided the service to Indian buyers has paid the service tax on maintenance service after the warranty period. 10. In these circumstances, we have no hesitation to hold that as the appellant has provided the service of procuring purchase orders for their foreign clients and providing maintenance service to the Indian buyers during the warranty period on behalf of their foreign clients on the instructions of foreign clients are covered .....

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recipient in respect of a service is not defined in the Finance Act, 1994 or in the rules made thereunder, the gap has to be filled by construction and on the analogy of the transaction of sale of goods, the service recipient in a transaction of the provision of service, has to be treated as the person - (a) on whose instructions the service has been provided and who is obliged to make payment for the provision of service; and (b) whose need is satisfied by the provision of service - it may be h .....

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by the provision of service. The only situation where in respect of some service provided by A which was ordered and paid for by B, a person C who has benefited from the service, can be treated as service recipient, when B has acted purely as an agent of C. Therefore in respect of services covered by Rule 3(1)(iii) of the Export of Services Rules, 2005, which are the service in relation to business or commerce, the same provided by a person in India for use in relation to business or commerce w .....

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