No Service Tax Leviable on Service Rendered to Foreign Supplier Falls Under Category of ‘Export of Service’: CESTAT [Read Order]

The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that no service tax is leviable on service rendered to foreign suppliers which fall under the category of ‘export of service’. 

Orbit Research Associates Private Limited, the appellant assessee appealed against the order passed by the Commissioner (Appeals) for disallowing the exemption claimed by the assessee from payment of service tax on export of service by treating the service rendered by the appellant as business auxiliary service defined under section 65(105)(B) of the Finance Act 1994 to an entity situated in India. 

S. Radhakrishnan, the counsel for the assessee contended that the Commissioner (Appeals) committed an illegality in confirming the demand in as much as the 2005 Export Rules relied upon in the show cause notice had been superseded by the 2012 Rules. 

Further submitted that even under the 2012 Rules, the services would be export of service and, therefore it was not taxable and the assessee was not liable to pay the service tax demand raised by the department. 

Rajeev Kapoor, the counsel for the department contended that the assessee was not an intermediary and as the services provided by the assessee were within the territory of India, they had been correctly classified to be taxable under business auxiliary service which was taxable as per the law. 

The Bench observed that for the services rendered by the assessee to the foreign supplier, the assessee receives service charges called commission charges in convertible foreign exchange and treated this service as an ‘export of service’. 

Also held that the assessee had not paid any service tax, since the services were rendered to a foreign supplier and the service charges were received in convertible foreign exchange. 

The two-member bench comprising Dilip Gupta (President) and Hemambika Priya (Technical) quashed the order passed by the Commissioner (Appeals) while allowing the appeal filed by the assessee. 

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