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M/s Barco Electronics Systems Pvt. Ltd. Versus Commissioner of Custom, Central Excise & Services Tax, Noida

2016 (9) TMI 986 - CESTAT ALLAHABAD

Whether services provided by the appellant as commission agent for sale of goods of its foreign principal M/s Barco Control Rooms GMBH, Germany on their behalf is to be treated as export of services under Rule 3 of Export of Service Rules, 2005 during the relevant period, i.e. 01.04.2006 to 31.03.2011 - Held that:- the issue herein is squarely covered by the precedent ruling of this Tribunal in the case of Microsoft Corporation (I) (P) Ltd. [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)]. We also ta .....

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t liable to pay service tax under the Finance Act, 1994. Accordingly, the impugned order is set aside. - Aplication dsposed of - ST/3707/2012 - Final Order No 70604/2016 - Dated:- 7-6-2016 - Mr. Anil Choudhary, Member (Judicial) and Mr. Anil G. Shakkarwar, Member (Technical) Shri Puneet Bansal, Advocate & Shri Prateek Jain, Advocate, for the Appellant(s) Shri Rajeev Ranjan, Joint Commissioner (AR) for the Department ORDER The appellant, M/s Barco Electronics Systems Pvt. Ltd., is in appeal a .....

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on and accordingly have suppressed the facts from the Revenue and accordingly, a demand of ₹ 2,29,21,508/- was confirmed for the extended period 2006 -2011 along with interest and also penalty of equal amount jointly under Sections 76, 77 and 78 of Finance Act, 1994. Being aggrieved, the appellant has filed appeal before this Tribunal. 2. The issue in this appeal is whether services provided by the appellant as commission agent for sale of goods of its foreign principal M/s Barco Control R .....

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ntered into an agreement with Barco, Germany dated 17.12.2003. A copy of the agreement dated 17.12.2003 is enclosed with the appeal folder. The above agreement expired on 31.12.2006 and a new agreement dated 01.01.2007 was entered into which expired on 31.12.2009. After the expiry of the above agreement, the commission payable to the Appellant was governed by the Transfer pricing policy of the company. 4. According to the agreement with the foreign principle the relevant features of the agreemen .....

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having its office at An der Rossweid 5 D76229, Karisruhe, Germany, represented by Mr. Carl J Peeters. President of BCD hereinafter referred to as "Buyer" HAVING WITNESSTH: WHEREAS BUYER is interested in obtaining from SUPPLIER services as described in Appendix 1, for hereinafter referred to as the "Services" Appendix 1 Services to be provided by Supplier The supplier provides he below listed services through its employees acting as a Description: Sales Office India Key respo .....

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ing strategies according with PB strategies Discount policies according with PB strategies Sales coordination within the other regions for international projects Sales and profit result in the region Coordination with the non sales team with the BU Appendix 2 Price of services listed in appendix 1 The Supplier will charge the Buyer on the basis of a commission on sales The sales commission for the direct sales of the buyer to the end user is normally calculated on the difference between the buye .....

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nt company all over the world and 'NO' stands for National Organization, which has been used to refer to the marketing divisions of the company. Further, PB' stands for product base used to refer to the manufacturing units of the appellant company. It is further stated that the appellant company is negotiating with the prospective customers of Barco, Germany and procuring the orders from the customers in India. For this purpose, the appellant interacts and liaises with the customers .....

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The Range Superintendent with a letter 22-07-2009, directed the appellant to deposit the Service tax on the amounts ₹ 4,28,23,582/- and ₹ 2,82,17,588/- received during the financial years 2006-07 and 2007-08 respectively being commission received for providing services to Barco, Germany. The appellant replied stating that the said services fall in the ambit of 'export of service' as they satisfied all the conditions under the Export of Service Rules, 2005. Thereafter, summon .....

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g service tax at ₹ 2,29,21,508/- along with interest and proposing penalty. The commission earned and remittance received is as follows:- S.N. Year (Rate of Service Tax) Commission Received Service Tax (Including cess) 1. 2006-2007 (12%) 28217588 3453833 2. 2007-08 (12%) 40222345 4971482 3. 2008-09 April, 2008 to 24.02.2009 (12%) 14731450 1820808 4. 24.02.2009 to 31.03.2009 (10%) 4660364 480017 5. 2009-10 (10%) 31510244 3245554 6. 2010-11 (10%) 86891417 8949814 Total 20,62,33,408 2,29,21,5 .....

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prescribed under Rule 3(1) and 3(2) as they are a person located in India and have provided services to a person located outside India, such services are for business and commerce, such services have been delivered outside India and used outside India and further payment of such services, have been received in India in convertible foreign exchange. The SCN was adjudicated by the Id. Commissioner, who was pleased to confirm the proposed demand with interest and penalty observing that the ultimat .....

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r and on behalf of foreign principal. Such services have been provided in India and, therefore, it does not fall under the provisions of export of services. So far as, the contention of the appellant that the provisions of services qualifying for the export of services, as clarified by C.B.E.C. Circular dated 24-02-2009 is also of no help, since the benefit of the services had accrued to consumers in India. Thus, the benefit of services is terminating in India only. As regards the invocation of .....

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24-02-2009 and also by the ruling of this tribunal in the case of Paul Merchant Ltd. Vs. C.C.E., Chandigarh 2013 (29) S.T.R. 257 (Tri.-Del.) and also in Microsoft Corporation (I) (P) Ltd. vs. C.S.T., New Delhi :2014 (36) STR 766 (Tri.-Del.) wherein also by majority, it was held that whether the Indian subsidiary company have provided market development operations for foreign principal. It was business auxiliary services provided from India to a service recipient located outside India. Marketing .....

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India, they were export of services, not liable to be taxed in terms of Export of Service Rules, 2005, read with the Finance Act, 1994. 10. The Id. AR for the Revenue, relies on the impugned order. 11. Having considered the rival contentions, we find that the issue herein is squarely covered by the precedent ruling of this Tribunal in the case of Microsoft Corporation (I) (P) Ltd. (Supra). We also take notice of the fact of the C.B.E.C. Circular No. 111/5/2009-, S.T. dated 24-02-2009, the releva .....

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dated 14-03-2006] on the ground that these activities do not satisfy the condition 'used outside India', (i) Call centres.................................................. (ii) Medical Transcription………………………………. (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 receives commission for his services from for .....

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ategorizes the services into three categories: (i) Category I [Rule 3(1)(i)]:………………………………. (ii) Category II [Rule 3(1)(ii)]:………………………………. (iii) Category Ill [Rule 3 (1) (iii)]: For the remaining services(that would not fall under category I or II), which would generally include knowledge or technique based services, which are not .....

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hen such services are provided. 3. It is an accepted legal principle that the law has to be read harmoniously so as to avoid contradictions within a legislation. 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 des .....

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