Sara Sae P Ltd. Vs Commissioner, Customs, Central Excise & Service Tax (CESTAT Delhi)
The first issue is regarding the levy of service tax on the commission received from foreign companies has recently been decided against the Revenue by this Bench in M/s Involute Engineering Pvt. Ltd.5, both with regard to the period prior to February 27, 2010 and w.e.f. February 27, 2010. The relevant portion of the decision is reproduced below:
18. A perusal of rule 3 (2) of the 2005 Rules, as it existed prior to February 27, 2010, would indicate that the provision of any taxable service specified in sub-rule (1) of rule 3 shall be treated as export of service when the following two conditions are satisfied:
(a) such service is provided from India and used outside India; and
(b) payment of such service is received by the service provider in convertible foreign exchange.
19. There is no dispute in the present appeal that the payment for the service was received by the appellant in convertible foreign exchange. The dispute is whether the service was provided from India and used outside India. The Commissioner has observed, for the period prior to February 27, 2010, that the appellant was providing services in relation to procurement of orders from customers located in India and these services cannot be delivered outside India. Thus, the appellant would not satisfy the condition of requiring the services to be used outside India and in this connection, the Commissioner placed reliance upon the Circular dated May 13, 2011. Thus, the demand has been confirmed on the premise that the appellant was rendering services in relation to promotion of goods in India (including procurement of orders; collection of payment, etc.), and therefore, the services were being ‘provided and used in India’. On this basis, the transactions have been held to not qualify as export of services in terms of rule 3(2) of the 2005 Rules.
22. It would be seen from the aforesaid factual position stated by the appellant in reply to the show cause notice that the appellant had been representing various foreign companies in India and these foreign companies did not have any business or any other office in India. The appellant promoted the business of such foreign companies in India and as a consideration for this service, received commission from the foreign companies in convertible foreign exchange. In fact, the appellant has also described the manner in which it had promoted the business of such foreign companies. The appellant has stated that it procured orders on behalf of such foreign companies in India and whenever any Indian company issued a tender, the appellant sent it to the foreign companies and also bid on behalf of the foreign companies under their instructions. If the bid is accepted, the appellant procures orders from the Indian company on behalf of the foreign companies. The purchase orders are raised in the name of foreign companies. The foreign companies thereafter export the goods to the customers in India and the invoices are raised directly on the customers. The appellant thereafter raises an invoice for its commission on the foreign companies and receives the commission amount in convertible foreign currency. It is, therefore, clear that the appellant supports such foreign companies to procure orders in India. Such service is provided from India and used outside India. The service rendered by the appellant would, therefore, satisfy the twin conditions set out in rule 3(2) of the 2005 Rules as has also been clarified by the Circular dated February 24, 2009.
33. The Commissioner, in regard to the period post February 27, 2011 has recorded a finding that though the condition relating to service being used outside India has been omitted, but the appellant could not substantiate the quantum of services provided after February 27, 2010 and the consideration received thereon and so the entire demand has to be confirmed.
34. As noticed above, 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. Even otherwise, for the period prior to February 27, 2010, it has been held that no service tax could be levied. Thus, it was immaterial as to whether the appellant was able to substantiate the quantum of services provided after February 27, 2010 and the consideration received thereon.
In view of the above The order dated December 11, 2013 passed by the Commissioner in so far as it relates to the demand of service tax on the Commission received from foreign companies is set aside.
