Sojitz India Private Limited Vs Pr. Commissioner of Central GST & Central Excise (CESTAT Mumbai)
This appeal before the CESTAT Mumbai concerned the levy of service tax on commission earned by an Indian company for services provided to its foreign group entities during the period from 1 October 2006 to 27 February 2010. The appellant was engaged in providing facilitation and support services in relation to the import of goods into India and export of goods outside India, including acting as an indenting agent for overseas group companies. While service tax was paid on taxable services rendered to domestic entities, the appellant treated similar services rendered to foreign entities as export of services and did not discharge service tax on the commission received in foreign currency.
Following scrutiny of the appellant’s records, the department alleged that the services provided to foreign entities constituted taxable Business Auxiliary Services under Section 65(105)(zzb) of the Finance Act, 1994, and raised a service tax demand of over ₹2.84 crore along with interest and penalties. The Principal Commissioner confirmed the demand to the extent of approximately ₹2.77 crore and imposed penalties, leading to the present appeal.
The appellant contended that it acted only as an indenting agent for foreign suppliers by assisting in obtaining enquiries, facilitating execution of contracts, providing market and customer information, and supporting customer visits. It was emphasized that the appellant had no authority to negotiate prices, conclude contracts, bind the foreign entities, or provide services to Indian customers on behalf of those entities. The appellant argued that the services were rendered to recipients located outside India, the consideration was received in convertible foreign exchange, and the benefit of the services accrued outside India. Accordingly, the services qualified as export under Rule 3 of the Export of Service Rules, 2005, and were not taxable. Reliance was placed on CBEC circulars clarifying that the accrual of benefit outside India is the relevant test, as well as on judicial precedents, including a Larger Bench decision of the Tribunal. It was also pointed out that in an identical dispute involving the appellant’s Delhi unit, the proceedings were dropped by the department.
