Komatsu India (P) Limited Vs Commissioner of GST & Central Excise (CESTAT Chennai)
In connection with promotion of sales, marketing survey and providing such activities, the appellants is also undertaking after sales service which is in the nature of product support. The department has classified the activity under ‘Management, Maintenance and Repair Service’. There is a major element of promotion of sales and marketing involved. The appellant is doing promotion of the sales and marketing the products manufactured by the foreign company. Needless to say the products can be effectively marketed only by ensuring after sales support. The products can be marketed and sold only if there is proper repairs / maintenance and warranty assurance for the products. They have appointed M/s.Larsen & Toubro Ltd. to carry out warranty repair and maintenance for the products sold in India.
Section 65A (2) (b) deals with classification of services when two or more services are rendered to the appellant. As per Section 65A (2) (b), when the services are bundled together, it has to be classified under head which gives the essential character of the service.
In similar set of facts the Tribunal in the case of CST Vs Life Care Medical Systems (supra) held that sales promotion and marketing being essential character of the bundle of services have to be classified under ‘Business Auxiliary Service’.
The Tribunal in the aforesaid decision relied on Bombay High Court judgment in CST Vs SGS India Pvt. Ltd. 2014 (34) STR 554 (Bom.) and the majority decision of the Tribunal in the case of Microsoft Corporation (I) (P) Ltd. – 2014 (36) STR 766 (Tri.-Del.). The facts being similar to the facts as reflected from the agreement placed before us in the present case, we are of the considered opinion that the services are classifiable under “Business Auxiliary Service” and not under Management, Maintenance and Repair Service. In such circumstances, when the appellant has rendered services (BAS) to the foreign company, such service would qualify as ‘Export of Service’ in terms of Rule 3 (1) (ii) of the Export of Service Rules, 2005 as the service recipient is situated outside India. When the services are exported, they are not taxable in India and for this reason the demand under this category cannot sustain. The department has classified the said service as Management, Maintenance and Repair Service and construed that as the place of performance of this service is in India, these services cannot be treated as ‘Export of Service’. We have already made clear that since the essential character of the agreement is marketing and sales promotion, the activity has to be classified under ‘Business Auxiliary Service’. In the case of BAS, as the recipient is situated outside India, such services are to be treated as ‘Export of Service’.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts of the case are that the appellants are engaged in manufacture of Dump Trucks and are a wholly owned subsidiary of Komatsu Asia Pacific Limited (KAP) belonging to the Komatsu Group of companies in Japan. They are registered with the department for payment of service tax under various categories of taxable services. On verification of records of the appellant, it was observed that though the appellant received various services from abroad they had not paid the service tax on such services in terms of Section 66A of the Finance Act, 1994. Show cause notice dated 29.07.2010 was issued proposing to demand service tax under the category of ‘Manpower Recruitment or Supply Agency Service’, Online Information and Database Access and Retrieval Service, Consulting Engineering Service and Maintenance and Repair Services. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved, the appellants are now before the Tribunal.
2. Learned Counsel Shri G. Natarajan appeared and argued for the appellants. The details of services, period involved and the demands are given as shown in the table below :
