The applicant herein has entered into a Memorandum of Understanding (MoU for short) with one foreign firm IDEAS (i.e. IDEAS Management Consultants, Oman). Under that Memorandum of Understanding (MoU for short), the applicant has agreed to become a Distributor of the books of various nature which will be supplied by IDEAS (i.e. IDEAS Management Consultants, Oman) and those books will be sold to the various purchasers in India. The question which has been posed in the application is as to whether the service tax liability will be for an activity described as under:-
“proposed IDEAS Oman will be selling educational books and printed manuals for onward sale to organizations in India via Creative Problem Solving India, Mumbai.”
The applicant stresses on the wording of the proposed activity which is purely a selling activity. It is clear that the applicant will be purchasing the books from IDEAS ( i.e. IDEAS Management Consultants, Oman) and will be further selling them to the Indian entities.
The MoU also covers some other activity for which the payment is required to be made by the applicant to IDEAS. It is a simple transaction between the Distributor and IDEAS that if the Distributor comes to know about any error that shall be corrected and the extra expenditure required to be made by IDEAS would be reimbursed separately. There is no element of ‘service’ in this. According to clause 4 of the Memorandum of Understanding (MoU for short) which says:
“4. “Purchase of Products.
(i) Authorised Distributor shall pay IDEAS the Authorised Price plus shipping, handling, rush, and other charges reflected on the invoice within thirty (30) days of the IDEAS invoice date.”
The clause is more than clear that the Distributor would have to bear apart from the price of the books, the shipping, handling, rush, and other charges. It is clear that the Distributor applicant has not asked any question about whether there is any service provided by IDEAS to the Distributor. The question is very simple and clear as to whether the sale of the books to the Indian entities involves any ‘service’ and would attract the service tax liability. The answer is clearly in negative. It is therefore, hold that this service does not entail and invite any liability for service tax. The question is answered accordingly and the application is disposed of.