The appellant, M/s Involute Engineering Pvt. Ltd. is engaged in rendering business auxiliary service and represents various foreign companies in India, in lieu of which it receives commission.
The services rendered by the appellant include procurement of orders for foreign companies; assistance in participation of tenders; negotiation with customers; collection of payments; and liaising activities.
The appellant did not discharge service tax on the commission received in convertible foreign currency as it believed that the services rendered by it to foreign companies amounted to export of service under the Export of Service Rules, 2005.
During the course of audit of the records of the appellant for the period January, 2006 to March, 2009, the officers noticed that the appellant had received commission from abroad during the period from 2004-05 to 2008-09, which appeared to be taxable under BAS.
A show-cause notice dated October 21, 2011 was issued to the appellant. It was proposed to levy service tax since the services rendered by the appellant may not tantamount to export of service under the 2005 Rules for the reason that though the services were rendered to foreign companies, the same were provided and used in India.
The appellant filed a reply to the show-cause notice and submitted that the services provided by the appellant, were export of services and so were not leviable to service tax.
The counsel for the appellant, B.L. Narasimhan contended that the appellant is not liable to pay service tax on commission received from foreign companies and the findings recorded in the impugned order are clearly contrary to the principles laid down in various decisions that promotion and marketing of goods of foreign companies in India would qualify as export of service.
The coram headed by the President, Dilip Gupta noted that the only requirement after the amendment in Rule 3 (2) of the 2005 Rules is that the service recipient should be situated outside India and consideration should be received in foreign currency. Both the conditions stand satisfied.
Therefore, the CESTAT held that it is not possible to sustain the order passed by the Commissioner. It is, accordingly, set aside and the appeal is allowed.Subscribe Taxscan AdFree to view the Judgment