Place of performance of service is decisive for determining event of taxability as well as incidence of tax

The appellant appears to have performed service in India for ultimate consumption thereof in India by its clients/customers in India. The service is destined to exhaust in India and extinct soon after performance thereof. Post performance liability only remains to be discharged by foreign principal through the appellant in India. Thus the beneficiaries of services were located in India for ultimate consumption of the service provided in India.

The services provided by the appellant were only to benefit the consumers of Indian Territory and that was provided for and on behalf of the holding company in USA as well as the subsidiary in Singapore. The end user of service being located in India and need of such consumers being met by the appellant for and on behalf of its foreign principal, such services appear to have been provided in India and there appears no export of service. The foreign principal acted through its appellant Agent. The principal was not the beneficiary. A service provider acting directly or indirectly through its agent is not the beneficiary of service so provided while providing of service is its contractual obligation under terms of contract with clients/customers. Therefore in the present case of the appellant no service has occasioned to move out of India to a place out side India following well tested meaning of the term “export” under Section 2(18) of the Customs Act, 1962.

Business auxiliary service provided by a service provider in terms of Section 65(105)(zzb) of Finance Act, 1994 is taxable for the rationale that the principal to whom the marketing support is given by the service provider, ultimately makes available of goods or services to the consumers in India. Similarly marketing support provided to the foreign principal as agent thereof also results with either ultimate supply of goods or provision of services to the consumers of India only and service reaches its destination in India to the intended consumer of the goods or services. Therefore whether service is directly provided by a foreign Principal in India or foreign principal providing service in India through its agents in India makes no difference under service tax law when service tax is a VAT and that too destination based consumption tax as per Apex Court Judgment in All India Fedn. of Tax Practitioners (supra). Had the service been provided to the foreign principal not resulting with ultimate supply of goods or provision of service to the consumer in India, such services might have assumed the character or nature of export of service following tested principles of customs law in India(Para 27)

IN THE CESTAT, PRINCIPAL BENCH, NEW DELHI

Microsoft Corporation (I) (P) Ltd.

Versus

Commissioner of Service Tax, New Delhi

Stay Order No. ST/276/2009(PB), dated 31-7-2009 in Application No. ST/Stay/2721/2008 in Appeal No. ST/866/2008

ORDER

By D.N. Panda, Member (J)

1. Being aggrieved by the order of adjudication passed on 23-9-2008 by the learned Commissioner, Service Tax, New Delhi, the appellant came in Appeal to Tribunal with stay application for stay of realisation of the demand raised by that order with following consequence:

(i)      Service Tax amounting to Rs. 124,99,49,345/- (Rupees one hundred twenty-four crore, ninety-nine lakh, forty-nine thousand and forty-five only) out of Rs. 126,26,10,497/- was confirmed and recoverable from the appellant under the proviso to Section 73(1) read with Section 68 of the Finance Act, 1994 and Rule 6 of Service Tax Rules, 1994;

(ii)     Education Cess and Secondary and Higher Education Cess amounting to Rs.3,04,18,968/- (Rupees three crore, four lakh, eighteen thousand, nine hundred sixty-eight only) out of Rs. 3,06,42,746/was confirmed against the appellant under the proviso to Section 73(1) read with Section 66 of the Finance Act, 1994, Section 95 of Finance Act, 2004 and Section 136 of Finance Act, 2007;

(iii)    Penalty of Rs. 1,000/- (Rupees One Thousand only) was imposed upon the appellant under Section 77 of the Finance Act, 1994 for contravention of the provision of the Act ibid and the Rules framed thereunder; and

(iv)    Penalty of Rs. 128,03,68,313/- (Rupees one hundred twenty-eight crore, three lakh, sixty-eight thousand, three hundred and thirteen only) equivalent to the amount of service tax including both type of cess was imposed upon the Appellant under Section 78 of the Finance Act, 1994 for suppressing the value of the taxable services provided by the appellant with an intent to evade payment of service tax.

2. Aforesaid adjudication was made against the appellant relating to the period 19-4-2006 to 31-12-2006, denying exemption claimed by the appellant on the ground of exporting of business auxiliary service to the foreign principal. Such service was taxed by the impugned order. Added to this, service of repair and maintenance of software was made taxable by that order.

3. In terms of a market Development Agreement dated 1-7-2005 (sample copy available in appeal folder at pages 41-46), Microsoft Operation Pvt. Ltd. of Singapore (hereinafter referred to as “MO”) appointed the appellant to provide various technical support services including marketing of Microsoft products in the “territory” defined by the agreement and to identify the services to be provided by the Singapore concern to the Appellant. In the said agreement, the Appellant is referred to as the “subsidiary” and the term “territory” was defined to include Bhutan, India, Maldives, Nepal and British Indian Ocean Territory. Both “MO” i.e. Singapore concern and the “subsidiary” i.e. appellant are wholly owned subsidiaries of the holding company M/s. Microsoft Corporation of Washington (hereinafter referred to as “MSFT”). 4 (four) types of services were intended to be provided in terms of the above Agreement and those are as follows:

“2.        PRODUCT SUPPORT SERVICES & CONSULTING SERVICES

2.1        Product Support Services and Consulting Services. Subsidiary shall have a non-exclusive right to provide product support services and consulting services for Microsoft Products in the Territory.

2.2       Subsidiary’s Duties

2.2.1     Subsidiary will use its best efforts to further the interests of M.O. and to maximize the markets for product support services and consulting services in the Territory.

2.2.2     Subsidiary shall not solicit orders of agreements from outside the Territory.

2.2.3     Subsidiary may provide product support services, which may include standard Microsoft product support services for products which are generally made available to end-users and may include requests for support originating from the Territory.

2.3       MO’s Duties. MO will use its best efforts to assist Subsidiary with technical matters in connection with the marketing of Microsoft Products and Services.

3.         MARKETING OF MICROSOFT PRODUCTS

3.1        Marketing. Subsidiary shall have a non-exclusive right to market Microsoft Products in the Territory.

3.2       Subsidiary’s Duties. Subsidiary will use its best efforts to further the interests of MO and to maximize the markets for Microsoft Products in the Territory.

3.2.1     Subsidiary shall not solicit orders or agreements from outside the Territory. In soliciting orders, Subsidiary shall only be authorized to inform customers of price, payment, delivery and other terms offered by MO in accordance with information received from MO or its affiliates, as appropriate. Unless otherwise authorized herein or otherwise agreed by the parties, Subsidiary shall not enter into any agreements with customers regarding Microsoft Products, but shall instead promptly submit written customer orders to MO or its affiliates, as appropriate, for its acceptance or rejection.

3.2.2     Subsidiary shall assist MO as requested in collection past due accounts and performing other activities reasonably related to MO’s business.

3.3       MO’s Duties.

3.3.1     MO will use its best efforts to fill, or procure the fulfilment of, orders as scheduled and assist Subsidiary with technical matters in connection with the marketing of Microsoft Products and Services.

3.3.2     MO shall permit Subsidiary to operate a service on MO’s or its affiliate’s web sides for the support of MO’s or its affiliate’s customers in the Territory, without charge by MO.

4.         RGE SERVICES

MO shall reimburse Subsidiary for expenses arising from Resident Guest Employee Services (“RGE Services”). RGE Services include but are not limited to human resource expenses, legal expenses and internal information technology expenses.

5.         OTHER INTERCOMPANY SERVICES

5.1        Services between MO and MSFT and Affiliates. Subsidiary acknowledges that MO provides services to MSFT and its other affiliates from time to time. Subsidiary acknowledges that MO may from time to time provide as a service the physical payment to Subsidiary of amounts owed by MSFT or its other affiliates to Subsidiary. MO shall clearly identify for Subsidiary which portion of funds are paid on its own behalf and which are paid on behalf of MSFT. Subsidiary shall not hold MO liable for any disputed amounts owed by MSFT to Subsidiary that are not provided by MSFT to MO for payment to Subsidiary.

5.2       Services between MO and Subsidiary. MO and Subsidiary acknowledge that MO and/or its affiliates may from time to time provide services to Subsidiary and Subsidiary may from time to time provide services to MO and/ or its affiliates.

4. Payment terms for aforesaid 4 types of services were provided in para 6.1, 6.2, 6.3 and 6.4 of agreement which reads as under :-

“6.1 Product Support Services and Consulting Services. For product support services and consulting services rendered pursuant to Article 2, MO shall pay Subsidiary an amount equal to one hundred and ten percent (110%) of Subsidiary’s actual expenses, less revenues, incurred in connection with its duties, provided such expenses comply with Subsidiary’s budget, as adjusted from time to time, and provided, further, such expenses are not already covered by another section of this Agreement or covered in another agreement between Subsidiary and MO or any MO affiliate. The reimbursement and additional compensation shall be exclusive of any applicable consumption tax such as a Value Added Tax or a Goods and Services Tax, which consumption tax shall be the responsibility of MO.

6.2 Marketing of Microsoft Products. For assistance in the marketing of Microsoft Products under Article 3, MO shall pay Subsidiary one hundred and fifteen percent (115%) of Subsidiary’s actual expenses, less revenues, incurred in connection with its duties as defined in Article 3, provided such expenses comply with Subsidiary’s budget, as adjusted from time to time, and provided, further, such expenses are not already covered by another section of this Agreement or covered in another agreement between Subsidiary and MSFT or any MSFT affiliate. Taxes, insurance, duties, freight and other charges not attributable to the Microsoft Product itself paid by the customer shall not be considered in calculating the amount of commission. The commission payments shall be exclusive of any applicable consumption tax such as a Goods and Services Tax or a Value Added Tax which consumption tax shall be the responsibility of MO.

6.3 RGE Services. For RGE Services rendered pursuant to Article 4, MO shall pay subsidiary an amount equal to one hundred and ten percent (110%) of Subsidiary’s actual expenses, less revenues, incurred in connection with its duties, provided such expenses comply with Subsidiary’s budget, as adjusted from time to time, and provided, further, such expenses are not already covered by another section of this Agreement or covered in another agreement between Subsidiary and MO or any other MSFT affiliate. The reimbursement and additional compensation shall be exclusive of any applicable consumption tax such as a Value Added Tax or a Goods and Services Tax, which consumption tax shall be the responsibility of MO.

6.4 Other Intercompany Services. For other services and/or sales provided pursuant to Article 5, MO or Subsidiary shall invoice the recipient of the sales and/or services for such sales and/ or services at a price as may be agreed between the parties from time to time, provided, however, that any amount so invoiced shall be consistent with the arm’s length standard (as defined in the OECD transfer pricing guidelines and relevant national legislation). The invoice shall contain a general description of the sales or services and the cost of the sales and/or services to be paid.”

5.1 On the basis of materials on record and pleadings made by the appellant, learned Adjudicating Authority found that as per agreement dated 1-7-2005 business support was provided by the appellant to the Singapore concern. Such services were provided in India and were never provided out side India for which there was no export of services within the meaning of Rule 3(1) (iii) of Export of Services Rule 2005 for the period 19-4-2006 to 31-5-2007. Further, for the period 1-6-2007 onwards the criterion of providing of service outside India being omitted from the law, the condition of service provided from India and used outside India still remained in force. This does not grant immunity to the appellant from taxation in respect of Business Auxiliary services provided by the Appellant.

5.2 Ld. Adjudicating Authority formulated following 4 issues in Para 214 of the order of adjudication (at page 148 of the appeal folder) for consideration:

(i)      Whether the income earned on account of services claimed as export under the category of “business auxiliary services” is chargeable to service tax during the period 19-4-2006 to Dec., 2007.

(ii)     Whether income on account of “maintenance & repair of software” is chargeable to Service Tax during the period from 9-7-2004 to 6-102005.

(iii)    Whether income on account of “seminar & training fees-sponsorship received in relation to MCIPL Conferences” is chargeable to service tax under the category of “convention services” for the period 2002-03 to 2007-08 (upto Dec., 2007).

(iv)    Whether the income on account of “royalty” is chargeable to service tax.

5.3 The first issue was elaborately discussed by Ld. Adjudicating Authority in para 224 to 226 of the order of adjudication which reads as under :-

“224. The noticee has tried to make out a case that under the Market Development Agreement with M/s. M.O. Singapore they were providing Marketing support services. Even though with regard to Marketing Support Services, MCIPL creates services awareness of Microsoft products in India, they were delivered and used abroad in as much as in respect of these services with regard to the condition of services delivered outside India and used outside India, they submitted that the service recipient i.e. Microsoft Singapore did not have any office in India, the provision of marketing support services by MCIPL increased the sales turnover of Microsoft Singapore and impacted the following aspects of business operations of Microsoft Singapore in Singapore, i.e. Production operations, Sales operations, Finance operations, Recruitment plans etc. Therefore, the services were deemed to be delivered and used outside India. In other words, Noticee feels that the place of use of service will also be the place where the intended beneficiary is located. I am afraid to say that if this interpretation were to be accepted it would lead to the redundancy of the legal provisions. The Rules clearly specify two separate set of conditions i.e. the user should be located outside India and the use should also be outside India. These conditions have to be satisfied independently of each other. If the Noticee’s explanation were to be accepted, a mere change in location of the recipient will also lead to change in the place of use of service. For example, if in the case the recipient were to be relocated from Singapore to say Japan, in terms of the Noticee’s logic, the place of use of service will stand automatically shifted from Singapore to Japan. There is no effort made in the submissions to draw the distinction and establish independently where the services are being provided and/or used. If the mere location of the recipient was to determine the place of use, it will open innumerable loopholes of misuse whereby services meant to be used in India would be merely routed through a foreign recipient.

225. I, therefore, proceed to examine the case on pure merits as to whether the services rendered in this case have actually been used in India. The services involved in this case are Marketing Support Services for the marketing of Microsoft products in India. This comprises a host of services viz. maximising the markets for Microsoft products including all local advertising, and performing other activities including dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry, investigating feasibility of new markets for Microsoft retail products and providing other services of marketing nature etc. Much of this is accomplished by way of identifying the customers regarding marketing of Microsoft products, local advertising, performing other activities including dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry. These services once provided, are not capable of being used in a territory other than where they have been provided. In fact most of the time provision, delivery and use is happening simultaneously. It will be naive to even conceive that the above said services provided in India can even be delivered or used in a territory other than where these have been provided.

226. It has been stated in a number of circulars issued by the Board that Service Tax levy is a destination- based tax. This understanding follows similar understanding in some parts of the world. Particularly Europe, where the tax is levied at the place where the services are finally destined or used. The Indian Law, however, has clearly laid down that both the test of customer’s location and use should be satisfied. This will be clear from the following diagram :

It is only in situation 4 (subject to meeting other conditions) that the conditions of export are satisfied. It is inconceivable to imagine how: maximizing the markets for Microsoft products including all local advertising, performing other activities including dissemination of information to potential customers, commenting on any developments in the Indian territory affecting the software industry, investigating feasibility of new markets for Microsoft retail products and providing other services of marketing nature rendered in India, can be used elsewhere. Each of these services involves considerable physical execution that can not be provided outside India or used outside. These are not mere advisory services, whereby an opinion or a report is sent abroad MCIPL is in the business of sourcing clients from India for Microsoft products. It is an important pre-requisite for the business to source information that meets comprehensive marketing campaign/ strategies to promote and market their products and to achieve the results as targeted by the company. The services are required to be provided continuously in order to keep pace with the changing technological advancements and to meet local the requirements of the customers. Merely, because the payments are being received from overseas does not mean that the services have been used in a place outside India. If MCIPL were to even try using these services for a customer located in a place other than India, it will not yield the desired results.”

5.4 Ld. Commissioner attributed reasons for his decision in respect of first issue in Para 227, 228, 229 and 230 which read as under :-

“227. The services in this case were to be of no use if they were not put to use in the place where they originated. The word “use’ in its widest connotations also means “non-use”. The use of a service does not mean that the service provided must be liked or appreciated or acted upon. There can be a variety of reasons that may compel the beneficiary not to act upon the service received exactly in the manner service provided proposes to. But non action or taking an action other than what naturally seems to flow from the service provided does not take away the fact that service has been used. I consider relevant to mention that a distinction must be drawn amongst the words “user”, “beneficiary” and “buyer” of a service. While many a times they are same, they may not be so in all the cases. The benefits in this case would definitely flow to Microsoft Singapore but that does not mean that services have been used outside India.

“228. The Noticee has also given example of Call Centres/B.P.Os. where, according to the Noticee, the services are being considered as export on the ground that these are being provided to the recipients located abroad. The Noticee has, however, failed to cite any decided case law or adduce any other evidence, which could form the basis of coming to the conclusion that either the services of Call Centres/B.P.O.s are comparable to the services rendered by them or whether, if such a practice at all exists at some level, it has attained legal finality or precedential value for the determination of this case. Likewise, comparison made under Foreign Trade Development & Regulation Act, 1992 in respect of export of goods are of no avail as the export of goods is an entirely different matter governed by the lay specified elsewhere.

229. Moreover, during the period from 19-4-2006 to 28-2-2007, there was an added requirement that the service should have been delivered outside India and during the period of SCN from 19-4-06 to 31-5-07 there was one more requirement that service should have been provided outside India. The Noticee while interpreting the criterion for any service to qualify as exports has during the periods i.e. 19-4-06 to 28-2-07 and 1-3-07 to 31-6-07 represented that for any service to qualify as export in terms of Export of Service Rules, 2005, as amended, only the condition of delivery and use outside India is required to be fulfilled. They have completely ignored the condition which states that “payment for such service provided outside India is to be received by the service provider in convertible foreign exchange” and the fact that all these conditions are required to be satisfied together for Business Auxiliary Services to qualify as export of service.

230. The word “and” as conjunction had been inserted at the end of condition (a) clearly mandates that both the conditions have to be satisfied together. The moment both the conditions are read together the confusion regarding delivery and use disappears, as the words provided outside India clearly do not lend themselves to any confusion in as much as the intention of the law makers becomes immediately clear that the services to qualify as exports have necessarily to be provided outside India and not provided in India. The word “provided” is the equivalent of the word “manufacture” in the case of goods. It means “creation” or “origin”. Undoubtedly, the service has been provided in India. Thus the service was never provided outside India. For this additional reason also I feel that the services in this case do not constitute export within the meaning of Rule 3(i) (iii) of the Export of Service Rules 2005 for the period from 19-4-06 to 31-5-07. Further for the period 1-6-2007 onwards the criterion provided outside India was omitted but the condition of services provided from India and used outside India still remained in force.”

5.5 On the aforesaid background, Ld. Adjudicating authority discarded plea of export of services made by the appellant and held that there was no export of services for which the appellant was liable to pay service tax under Finance Act, 1994, under the category of Business Auxiliary services provided during the impugned period. Second issue in relation to repair and maintenance whether liable to service tax for the period 9-7-04 to 6-10-05 was decided by the Authority against the appellant with the reason of his decision appearing in Para 237 of the impugned order. Issue No.3 and 4 were decided in favour of the appellant. Point of limitation raised by the appellant was negatived by the learned adjudicating authority holding that the proceeding was not time barred for the reasons stated in Para 254 and 255 of the impugned order. Accordingly, service tax liability was determined by the ld. Commissioner with consequences of law to follow.

6. Ld. Sr. Counsel appearing for the appellant on 16-2-09 reiterated the stand of the appellant that services provided in terms of agreement dated 1-72005 were export services and sale of Microsoft products were done in terms of wholesale distribution agreement. But he did not have copy of such agreement on that day for which he requested to grant time for production of copy thereof. Accordingly the matter was adjourned to 16-3-2009. There was no Bench on 16-3-2009 for which the matter was called on 20-4-2009. On that day the appellant sought adjournment on the ground that Learned Sr. Counsel was unwell to travel from Chennai. Matter was allowed to be called on 24-4-2009 noticing that wholesale distribution agreement agreed to be furnished on 16-2-2009 was not furnished by Appellant to examine stand of the Appellant.

7. When the matter was called on 24-4-2009, the appellant submitted that soon after hearing of the stay matter on 16-2-09, there was a Board Circular issued on 24-2-2009 vide No. 111/05/2009-ST. C.B.E. & C. in terms of Para 1 (Hi) of the Circular has conveyed its decision that Indian agents who undertake marketing in India of goods of a foreign seller, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign exchange and such services which would generally include knowledge or technique based services, which are not linked to an identifiable immovable property or whose location of performance cannot be readily identifiable (such as, Banking and Other Financial services, Business Auxiliary services and Telecom services) that shall be export service. Interpreting Rule 3(1) (iii) of Export of Services Rules 2005, Board clarified that above types of services shall be “export”:

(a)     If they are provided in relation to business or commerce to a recipient located outside India; and

(b)     If they are provided in relation to activities other than business or commerce to a recipient located outside India at the time when such services are provided.

8. According to the Appellant above decision of Board was based on the rationale that relevant fact to decide export service is the location of the receiver and not the place of performance. Board clarified that the phrase “used outside India’ appearing in above Rule is to be interpreted to mean that the benefit of the service should accrue outside India and it is possible that export of service may take place even when the relevant activities take place in India so long as the benefits of these services accrue outside India. Accordingly benefit of promotion of business of a foreign company accrues outside India, for which the appellant is not liable to tax under Finance Act, 1994.

9. Ld. Counsel for the appellant further submitted that while conveying above decision, the Board has also directed the authorities below to apply aforesaid circular to all pending cases for disposal accordingly. It may be stated that, a Circular is binding on the authorities below but not on the Tribunal. Order in Original in this case was issued on 23-9-2008 for which present appeal is awaiting decision in accordance with the law laid down by Apex Court in the case of All India Fedn. of Tax Practitioners v. Union of India reported in AIT-2007-299-SC – 2007 (7) S.T.R. 625 (S.C.).

10. According to Ld. Sr. Counsel, Board has explained in the above Circular that it is an accepted legal principle that the law has to be read harmoniously so as to avoid contradictions within a  legislation. Keeping this principle in view, the meaning of the term ‘used outside India’ has to be understood in the context of the characteristics of a particular category of service as mentioned in sub-rule (1) of rule 3. For example, under Architect service (a Category I service [Rule 3(1)(i)]), even if an Indian architect prepares a design sitting in India for a property located in U.K. and hands it over to the owner of such property having his business and residence in India, it would have to be presumed that service has been used outside India. Similarly, if an Indian event manager (a Category II service [Rule 3(1)(ii)J) arranges a seminar for an Indian company in U.K. the service has to be treated to have been used outside India because the place of performance is U.K. even though the benefit of such a seminar may flow back to the employees serving the company in India. For the services that fall under Category III [Rule 3(1)(iii)], the relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase ‘used outside India’ is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for Category III services as per Rule 3(1)(iii) of Export of Services Rules, 2005, it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India. In all the illustrations mentioned in the opening paragraph, what is accruing outside India is the benefit in terms of promotion of business of a foreign company. Similar would be the treatment for other Category III [Rule 3(1)(iii)] services as well.

11. Ld. Sr. Counsel further argued as under :-

(a)     That the phrase ‘used outside India’ has to be interpreted to mean, if the service recipient is located outside India, the services are used outside India, notwithstanding place of performance of services being in India. But such contention was rejected by the Ld. Commissioner vide para 224 (page 150 & 151) by holding that it is not sufficient, if the user is located outside India, ‘the use should also be outside India” and these two conditions have to be satisfied independently.

(b)     The controversy is now set at rest. Vide Board Circular No. 111/05/2009-ST dated 24-2-2009 wherein the Ministry is now pleased to clarify that the relevant factor for category-III (Rule 3 (i) (iii) is the “the location of the services recipient” and not the “place of performance”. The phrase ‘used outside India’ is to be interpreted to mean that the benefit of the services should accrue outside India.

(c)     Further, the Board Circular while referring to illustrations has vide Para l(iii) refer to marketing support services in the following manner : “Indian Agents to undertake marketing in India of the goods of a foreign seller. In this case, the Agent undertakes the activities within India and receives commission for his services from the foreign seller in convertible foreign exchange.”

(d)     In the concluding para, (Para 3 of the circular) the Ministry is pleased to clarify as follows:

“In all the illustrations mentioned in the opening paragraph, what is accruing outside India is the benefit in terms of promotion of business of a foreign company”.

(e)     Thus, the issue is no longer res integra and has been set at rest through the Ministry’s clarification dated 24-2-2009.

(f)     Even before the Ministry had proceeded to issue the present circular, the Hon’ble South Zonal Bench of the Tribunal at Bangalore in the case of ABS India Ltd. v. CST, Bangalore, 2009 (13) S.T.R. 65 (T) and Blue Star v. CCE, Bangalore – AIT-2008-144-CESTAT– 2008 (11) S.T.R. 23 had also held that as long as the recipient of service is located outside India, it cannot be said that the service is delivered in India or used in India. The services are utilized only outside India and therefore would be eligible for the benefit of export of services.

(g)     Even recently, the New Delhi Bench of CESTAT in Gap International Sourcing India Pvt. Ltd. v. Commissioner of Service Tax – 2009 (15) S.T.R. 270 (Tri. – Del.) = 2009-TIOL-249-CESTAT-Del had granted absolute stay of tax demands on an identical issue on the ground that service recipient is located outside India.

(h)     The Id. Commissioner in the impugned order had clearly conceded that the service recipient is located outside India and does not have an office in India and the appellants have received the payment only in foreign exchange. In view of the above, the entire demands relating to export of service needs to be set aside.

(i)      The appellants reserve their liberty to place its arguments on invocation of extended period of limitation if so required at the appropriate juncture. Major portion of the tax demands are cleared barred by limitation in view of the fact department has been periodically accepting refund claims, claiming export rebate on these services and had also sanctioned the refunds for the period December 2006 and January, 2007.

(j)     The appellants also reserve the right to pursue arguments on cum-tax deduction and input credit availability without prejudice to the principle contention that the whole demands are not maintainable in view of the above board circular.

(k)     Show Cause Notice was issued on 23-4-2008 for which demand of Rs. 1,27,99,255/- relating to repair and maintenance of computer software was barred by limitation. Even the demand of Rs. 126,75,69,058 relating to export of service is time barred because Department was made aware of export services when registration application was filed on 17-10-2005 (Page 73 of Paper Book) and export intimation was filed before the authority on 4-10-2005.

(l)      Refund of CENVAT credit relation to the input services to the extent of Rs. 1.2 crores was already granted. Considering limitation aspect also an amount of Rs. 30.00 crores is not realisable and input credit of Rs. 20.00 crores is still available to the appellant towards refund.

(m)    Service recipient being located outside India and that is not being disputed by Revenue; there was export of service which shall enjoy exemption under Rule 3 of Export Service Rules, 2005.

(n)     Neither Microsoft USA not MO Singapore had office in India.

12. It is further submission by Ld. Sr. Counsel that without prejudice to the merits of the matter for a prima facie view, entire demand being barred by limitation there should be no pre-deposit direction during pendancy of appeal. So far as maintenance and repair activity carried out by the appellant is concerned, plea of the appellant is that Show Cause Notice was issued on 24 April 2008 seeking differential tax for the period 9-7-2004 to 6-10-2005 and the proceedings are hit by limitation on the following grounds:

(a)     The Central Board of Excise & Customs vide circular No. 70/19/03-ST dated 17-12-2003 was pleased to clarify that maintenance/repair service of computer software was not liable to tax since software are not goods.

(b)     The Ministry changed its stand vide its circular No. 81/2/05-ST dated 7-10-2005 by holding that maintenance or repair or servicing of computer software is liable to service tax under section 65(105)(zzg) read with sec. 65(64) of the Finance Act 1994.

(c)     Consequently, for the period 9-7-2004 to 6-10-2005 the appellants were guided through the Ministry’s own circular dated 17-12-2003 which was withdrawn only with effect from 7-10-2005.

13. Ld. Sr. Counsel placed reliance on the following decisions in support of aforesaid contentions and prayed that no pre-deposit may be insisted during pendancy of appeal, while decisions pressed into service in the course of hearing are dealt by this order hereinafter :

(1) 2009 (13) S.T.R.65 (Tri.-Bang.) – ABS India Ltd. v. CST, Bangalore

(2) AIT-2008-144-CESTAT 2008 (11) S.T.R. 23 (Tri.-Bang.) – Blue Star Ltd. v. CCE, Bangalore.

(3) 2006 (4) S.T.R. 565 (Tri.-Bang.) – Shilpa Colour Lab v. CCE, Calicut.

(4) 2008 (9) S.T.R. 186 (Tri. Bang.) – Excel Fin Cap Ltd. v. CCE, Hyderabad

(5) 1999 (114) E.L.T. 783 (S.C.) – Polar Industries Ltd. v. CCE, Meerut.

14. Ld. JCDR appeared on the first date of hearing on 16-2-2009 and argued that the Appellant performed entire service in India and clients/customers availing such services were in India for which liability to service tax arose in India. Further, Microsoft USA, products were sold in India with the help of the appellant. There was no export of service at all made for the appellant as held by ld. Commissioner.

15. On 24-4-2009, Revenue was represented by its counsel Sri Prabhat Kumar and assisted by ld. JCDR. Ld. Counsel Shri Prabhat Kumar placed that the manner of examination of the entire transactions of the appellant in adjudication is very clear from para 224 to 230 of order of adjudication. There is a reasoned and speaking order of adjudication. He supported the adjudication on the ground that services provided by the appellant were all along been availed in India by its customers/clients even though principal of the appellant was located outside India. Location of principal is immaterial since ultimate beneficiary of services were in India to avail benefit of service. Therefore Revenue contends that when ultimate target group of customers were in India, they were provided end product of service in India. Accordingly, Revenue’s interest shall be prejudiced if pre-deposit of the demand raised by order of adjudication is not ordered to be paid during pendency of appeal.

16. Heard both sides on different occasions and perused the record.

17. Section 94 of the Finance Act, 1994 has conferred Rule making power on the Central Government. Section 94(2)(f) thereof has conferred power w.e.f. 10-9-2004 to make Rule in respect of provisions for determining export of taxable service. Section 94(2)(g) has made provision to make rule on grant of exemption to, or rebate of service tax paid on, taxable services which are exported out of India. Accordingly Export of Services Rules, 2005 was enacted in terms of Rule making power u/s 94 read with Section 93 of the Finance Act 1994. Rule 3(2) of the said Rules defines the event of occasioning export. This sub-rule has undergone amendment as depicted by learned adjudicating authority in Para 218 of the order of adjudication. The same is reproduced below for convenience of reference:

“218 During the relevant period the law relating to export was specified in the Export of Service Rules, 2005. The specified service (BAS) was covered under Rule 3(1) (iii). The law has undergone changes from time-to-time. The said sub-rule together with sub-rule 3(2) provides the following conditions for this service in order to constitute as export:

From 19-4-06 to 28-2-2007:

(i)         Recipient should be located outside India.

(ii)        Such service is delivered outside India and used outside India and

(iii)       Payment for such services, provided outside India is received by the service provider in convertible foreign exchange.

From 1-3-2007 to 31-5-2007

While condition number (i) and (iii), as mentioned above, remained same, the condition number (ii) was revised as follows:-

Such service is provided from India and used outside India, and

From 1-6-2007 to 31-12-2007

The words “provided outside India” were omitted from the condition mentioned at (iii) above.”

18. In essence, there is no ambiguity that legislature intended that service is said to have been exported if the same is consumed outside India. Definition of the term “export” is nothing new to the fiscal legislation. The well tested and experienced Customs Act, 1962 has defined such term by Section 2(18) thereof to mean “taking out of India to a place outside India”. Therefore, in no uncertain terms “export of service” shall mean that out come of service should have been consumed outside India. But the present case of the appellant does not seem to be so when the consumers of services provided were in India only and even the contents of sample agreement dated 1-7-2005 establishes in substance that ultimate consumption of service was in India and the appellant was an intermediary to connect its foreign principal to the end user of service who are consumers in India.

19. Hon’ble Supreme Court in the case of All India Fedn. of Tax Practitioners v. UOI – AIT-2007-299-SC-2007 (7) S.T.R. 625 (S.C.) noticed that Economics holds the view that there is no distinction between the consumption of goods and consumption of services as both satisfy the human needs (para-4 of the Judgment). In para 6 and 7 the Hon’ble Court held as under:

“6.     At this stage, we may refer to the concept of “Value Added Tax” (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer.

7.      In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax”. (Emphasis supplied)

20. While dealing with meaning of “service tax” the Hon’ble Court in Para 17 to 20 held as under:

“17. As stated above, the source of the concept of service t’ax lies in economics. It is an economic concept. It has evolved on account of Service Industry becoming a major contributor to the GDP of an economy, particularly knowledge-based economy. With the enactment of Finance Act, 1994, the Central Government derived its authority from the residuary Entry 97 of the Union List for levying tax on services. The legal backup was further provided by the introduction of Article 268A in the Constitution vide Constitution (Eighty-eighth Amendment) Act, 2003 which stated that taxes on services shall be charged by the Central Government and appropriated between the Union Government and the States. Simultaneously, a new Entry 92C was also introduced in the Union List for the levy of service tax. As stated above, as an economic concept, there is no distinction between the consumption of goods and consumption of services as both satisfy human needs. It is this economic concept based on the legal principle of equivalence which now stands incorporated in the Constitution vide Constitution (Eighty-eighth Amendment) Act, 2003. Further, it is important to note, that “service tax” is a value added tax which in turn is a general tax which applies to all commercial activities involving production of goods and provision of services. Moreover, VAT is a consumption tax as it is borne by the client.

18. In Moti Laminates Pvt. Ltd. v. Collector of Central Excise, Ahmedabad 1995 (76) E.L.T. 241 (S.C.) we get a clue of an important principle, namely, “principle of equivalence”. In that judgment, this Court was required to explain the words excisable” goods” and “produced or manufactured”. It was held by this Court that the expression “excisable goods” has been defined in Section 2 of the Central Excise Act, 1944 to mean goods specified in the Schedule. It was held that the object for having a schedule in the Act was to fix rates under different entries including residuary entry. At this stage, we may say that the object of the Finance Act is also to fix rates of duty under different entries. However, the question which arose before this Court in Moti Laminates (supra) was the meaning of the word “goods” in Central Excise Act, 1944. This Court noticed that Section 3 of the 1944 Act levied duty on all excisable goods mentioned in the schedule provided they are produced and manufactured, therefore, this Court laid down the test that where goods are specified in the schedule they are excisable goods but whether such goods can be subjected to duty would depend on whether they were produced or manufactured by the assessee. This Court further explained that the expression “produced or manufactured” would mean that the goods produced must satisfy the test of saleability/marketability.  The reason being that the duty under the 1944 Act is on manufacture/production but the manufacture/production is intended for taking such goods to the market for sale. It was observed that the obvious reason for levying excise duty linked with production or manufacture is that the goods so produced must be a distinct commodity known in the market. We quote herein below para 7 of the said judgment, which is as follows:

“The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must be useable, moveable, saleable and marketable. The duty is on manufacture or production but the production or manufacture is carried on for taking such goods to the market for sale. The obvious rationale for levying excise duty linking it with production or manufacture is that the goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for purposes of buying and selling. Since the solution that was produced could not be used as such without any further processing or application of heat or pressure, it could not be considered as goods on which any excise duty could be levied.”

Therefore, even if an item is manufactured or produced, it will not fall in the concept of goods till the test of marketability is satisfied. In the case of Moti Laminates (supra) the “solution” was an intermediate product produced in the course of manufacture of laminated sheets. It had a short shelf life. It was not marketable, therefore, this Court took the view that the solution was not “goods” and, therefore, not dutiable.

19. The importance of the above judgment of this Court is twofold. Firstly, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It is this principle of equivalence which is in-built into the concept of service tax, which has received legal support in the form of Finance Act, 1994. To give an illustration, an Event Manager (professional) undertakes an activity, namely, of organizing shows. He belongs to the profession of Event Manager. As long as he is in the business or calling or profession of an Event Manager, he is liable to pay the tax on profession, calling or trade under Entry 60 of List II. However, that tax under Entry 60 of List II will not cover his activity of organizing shows for consideration which provide entertainment to the connoisseurs. For each show he plans and creates based on his skill, experience and training. In each show he undertakes an activity which is commercial and which he places before his audience for its consumption. The tax on service is levied for each show. This situation is very similar to a situation where goods are manufacture or produced with the intention of being cleared for home consumption under the Central Excise Act, 1944. This is how the principle of equivalence equates consumption of goods with consumption of services as both satisfy the human needs. In the case of Internet Service Provider, service tax is leviable for on-line information and database provided by web sites. But no service tax is leviable on E-commerce as there is no Database Access.

20. On the basis of the above discussion, it is clear that service tax is VAT which in turn is both a general tax as well as destination based consumption tax leviable on services provided within the country”.

(Emphasis supplied)

21. In terms of letter dated 4-10-2005 (at page 47 of the Paper Book) the appellant informed the learned Asst. Commissioner, Gurgaon that it provides marketing services to Microsoft Corporation USA, which is located outside India. Further, Microsoft Corporation, USA uses the services provided by the company in relation to commerce/Industry. Also as per Rule 3 of Export Services Rules, 2005 the marketing services provided by the Microsoft, USA qualifies as an export service. Refund was claimed under Rule 5 of CENVAT Credit Rules, 2005 in respect of input services. Similar such letter was also issued by the Appellant on 30-11-2005 (at page 54 of Paper Book), on 31-1-2006 (at page 56 of Paper Book) and on 31-3-2006 (at page 65 of Paper Book). For the first time, by letter dated 7-2-2007 acknowledged by Revenue on 9-2-2007 (at page 79 of Paper Book), the appellant informed the Department as above with additional information, stating recipient of marketing services provided by the appellant was the Singapore subsidiary of Microsoft USA and this subsidiary is referred to as “MO” in the agreement dated 1-7-2005. It was further informed that the USA concern has no EOU and not required to submit quarterly return to the licensing authority for an EOU. The appellant was sanctioned Cenvat credit refunds relating to inputs in terms of pages 82 to 95 of Paper Book.

22. Record reveals that the Appellant as well as Singapore concern under agreement dated 1-7-2005 were subsidiaries of Microsoft Corporation, USA. The appellant for the first time informed the Authority vide letter dated 7-2-2009 that recipient of service provided by the appellant was Singapore concern i.e., “MO” and no such information was given to the authority prior to that date. All the letters submitted by the Appellant to Revenue show that services were provided by the Appellant to Microsoft Corporation, USA. But no such agreement was brought to record by the Appellant in the course of hearing. Services provided by the appellant established nexus of services provided with the recipient consumers/clients/customers in India, all along, and the Appellant facilitated and ensured as well as established destination of service to be India.

23. When the matter was heard on 16-2-2009, the appellant submitted that it shall file whole sale distribution agreement on 16-3-2009. But no such document was filed on subsequent dates of hearing. Prima facie, it appears that the ultimate outcome of provision of services reached to the consumers in India and that were ultimately meant to be consumed in India. Accordingly destination based consumption of service ended with performance of service in India and that satisfies the performance based service tax concept as held by Apex Court in All India Fedn. of Tax Practitioners – AIT-2007-299-SC  2007 (7) S.T.R. 625 (S.C.). In Para 7 of the judgment it has been held that service fall into two categories, namely, property based services and performance based services. Such fundamental concept brings the service performed in India to the fold of law relating to service tax under Finance Act, 1994. Therefore place of performance of service is decisive for determining event of taxability as well as incidence of tax. The appellant appears to have performed service in India for ultimate consumption thereof in India by its clients/customers in India. The service is destined to exhaust in India and extinct soon after performance thereof. Post performance liability only remains to be discharged by foreign principal through the appellant in India. Thus the beneficiaries of services were located in India for ultimate consumption of the service provided in India. Accordingly, prima facie it appears that interpretation of law by the CBEC in its circulars dated 24-2-2009 runs counter to the ratio laid down by Apex Court in All India Fedn. of Tax Practitioners –AIT-2007-299-SC  2007 (7) S.T.R. 625 (S.C.). Further, service tax is a

VAT which in turn is destination based consumption tax as held in Para 7 of the Apex Court judgment aforesaid.

24. It also appears that the services provided by the appellant were only to benefit the consumers of Indian Territory and that was provided for and on behalf of the holding company in USA as well as the subsidiary in Singapore. The end user of service being located in India and need of such consumers being met by the appellant for and on behalf of its foreign principal, such services appear to have been provided in India and there appears no export of service. The foreign principal acted through its appellant Agent. The principal was not the beneficiary. A service provider acting directly or indirectly through its agent is not the beneficiary of service so provided while providing of service is its contractual obligation under terms of contract with clients/customers. Therefore in the present case of the appellant no service has occasioned to move out of India to a place out side India following well tested meaning of the term “export” under Section 2(18) of the Customs Act, 1962. Such a view is also very clear when object of Article 2.1, 2.2.1, 2.2.3, 2.3, 3.1, 3.2.1, 3.2.2, 3.3.1 and 3.3.1 of the sample agreement dated 1-7-2005, which has been extracted hereinbefore, is read. Remuneration for the service provided by the appellant was linked with expenses incurred in terms of Article 6.1 and 6.2 of the sample agreement dated 1-7-2005. It may be appreciated that to provide service, expenses were incurred in India in terms of the sample agreement for which the appellant got reimbursement of such expenses and a percentage thereof is paid to it as its remuneration. Thus expenditure met in India has generated service potentiality in India.

25. Reading of the letters filed by the Appellant as stated in this order hereinbefore and also reading of the sample agreement throws light that the appellant was acting on behalf of the foreign principals in India as subsidiary of the foreign holding company. It had acted as agent of the foreign principals to result with provision of services in India out of the endeavour of the appellant with the technical assistance of the holding company and subsidiary company abroad. The service provided in India was consumed without reverting back to foreign principals for consumption abroad. Ultimate outcome of service having been exhausted in India, there appears to be no export of such services since efforts in India generated service recipients in India only. The foreign principals discharged post service contractual obligations. Even the Appellant’s plea that Board Circular dated 24-2-2009 clarified that the benefits of the service accrue outside India, does not appear to be of any help to the appellant since benefit of the services has accrued to the consumers in India for the service provided to the consumers thereat to fulfill contractual obligation of the foreign holding company as well as subsidiary company of Singapore. The benefit of service terminated in India only, without travelling abroad. The performance based service provided in India in terms of the sample agreement dated 1-7-2005 appears to have resulted with provision of service to the consumers in India. Therefore it appears that even the circular does not explain the position of law as claimed by the appellant to its advantage.

26. The circulars hold that location of service receiver is relevant factor to decide export of service under Rule 3(1)(iii) of Export of Services Rules, 2005. This does not rule out that when ultimate outcome of service is consumed in India, the service exhausts or extinct thereat without being capable of exported, losing its utility. Performance of service being decisive for taxation and to decide taxable event and incidence of tax, export of service pleaded by the appellant is inconceivable.

27. It may be stated that business auxiliary service provided by a service provider in terms of Section 65(105)(zzb) of Finance Act, 1994 is taxable for the rationale that the principal to whom the marketing support is given by the service provider, ultimately makes available of goods or services to the consumers in India. Similarly marketing support provided to the foreign principal as agent thereof also results with either ultimate supply of goods or provision of services to the consumers of India only and service reaches its destination in India to the intended consumer of the goods or services. Therefore whether service is directly provided by a foreign Principal in India or foreign principal providing service in India through its agents in India makes no difference under service tax law when service tax is a VAT and that too destination based consumption tax as per Apex Court Judgment in All India Fedn. of Tax Practitioners (supra). Had the service been provided to the foreign principal not resulting with ultimate supply of goods or provision of service to the consumer in India, such services might have assumed the character or nature of export of service following tested principles of customs law in India. But present case is a departure to that principle. The appellant is an intermediary meant to provide well defined services to clients/ customers in India with the technical assistance of foreign principal. To provide service in India, the appellant was supported by technical assistance by the foreign principals and the appellant as well as Singapore concern are subsidiaries of the holding company in USA being centrally governed. Service tax law does not appear to have brought any anomalous situation to the concept of service provided in India for its ultimate consumption thereat.

28. In the course of hearing, learned Counsel placed reliance on the decisions of Tribunal in case of ABS (India) Ltd. v. – 2009 (13) S.T.R. 65 and Blue Star AIT-2008-144-CESTAT– 2008 (11) S.T.R. 23. Such reliance was placed to advance argument that when recipient of services is located outside India, it cannot be said that the services were delivered in India or used in India. Services are utilized only outside India and such services shall be eligible to benefit of export of services. Subsequent to hearing of the matter, learned Counsel also submitted a copy of the decision of the Tribunal in the case of Lenovo (India) Pvt. Ltd. – 2009 -TIOL-911-CESTAT-BANG, wherein it was held that the said case was similar to case of ABC (India) Ltd. and Blue Star (supra). But these decisions, prima fade, do not come to rescue of the appellant for the law laid down by Apex Court in All India Fedn. of Tax Practitioners – AIT-2007-299-SC – 2007 (7) S.T.R. 625 (S.C.).

29. Appellant also relied on the decision of Ahmedabad Bench in 2009 TIOL-602-CESTAT-AHMD. A copy of the said decision was submitted subsequent to hearing. That decision related to interim order passed by the Ahmedabad Bench. However, while passing order, Bench had taken note of the decision in Blue Star and ABS (India) Ltd. In addition to these citations, the appellant also relied on decision of Delhi Bench in case of Gap International Sourcing (India) Pvt. Ltd. – 2009 (15) S.T.R. 270 (Tri. – Del.) = 2009-TIOL-249-CESTAT-DEL. Appellant’s submission was that absolute stay was granted in identical issue of existence of recipients of services outside India shall enjoy export service benefit. Therefore, appellant’s contention in present case is that when services recipients were outside India, appellant is entitled to similar benefit.

30. In respect of maintenance contract, appellant relied on various circulars i.e. 70/19/03/ST dated 17-12-2003 and 81/02/05 dated 7-10-2005. According to appellant, these circulars clarified what are maintenance/repairs of service of computer software. When the software was not goods, maintenance thereof is not repair and maintenance. But such view survived for limited period from 1712-2003 to 6-10-2005 when circular 81/02/05 was issued. By circular 81/02/05 software was made liable to service tax. Appellant’s plea was that it was eligible to the benefit of circulars during relevant period before issuance of show cause notice. Therefore, there cannot any realization of the demand so far as maintenance and repair service of software is concerned. This aspect has received our due consideration in the course of hearing of stay application to work out interim modality.

31. Learned Adjudicating Authority appears to have thread bare examined the issue by a reasoned and speaking order in different paragraphs depicted aforesaid. There were no materials brought out by the appellant to distinguish its case as export. The Appellant relied on the decision of Hon’ble High Court of Bombay in the case of Wardha Coal Transport Pvt. Ltd., Chandrapur v. UOI – AIT-2009-38-HC 2009 (13) S.T.R. 490 (Bom.)  . to plead for stay of realisation of the demand in view of stay order passed by Ahmedabad Bench. It may be stated that no two cases are equal. It may also be stated that interim orders cannot be precedent decisions following decision of Apex Court in Empire Industries case – 1985 (20) E.L.T. 179 (S.C.).

32. Prima facie, the appellant has not brought out its case for total waiver of pre-deposit during pendancy of appeal since appeal is a conditional right granted by law as held in the case of Vijay D. Mehta – 1989 (39) E.L.T. 178 (S.C.) = 1988 (4) SCC 402. Balance of convenience does not tilt in favour of the appellant. There was no case made out to show that irreparable injury or undue hardship shall be caused to the appellant if no full waiver is granted. So also, neither materials were produced nor was financial hardship pleaded in the course of hearing. Rather, Revenue appears to be prejudiced if realisation of demand is stayed following decision of Apex Court in Benara Valves case AIT-2006-252-SC – 2006 (204) E.L.T. 513 (S.C.). The applicable principles have also been set out succinctly in Silliguri Municipality and Ors. v. Amalendu Das and Ors. (AIR 1984 SC 653), M/s. Samarias Trading Co. Pvt. Ltd. v. S. Samuel and Ors. (AIR 1985 SC 61) and Assistant Collector of Central Excise v. Dunlop India Ltd. (1985 (19) E.L.T. 22 (S.C.) = AIR 1985 SC 330).While arriving at the above conclusion, we were conscious of decision of Apex Court in Ravi Gupta’s case – AIT-2009-129-SC–2009 (237) E.L.T. 3 (S.C.). The Hon’ble Supreme Court in Para 10 of the Judgment held as under:

“10. It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay-should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens’ faith in the impartiality of public administration, interim relief can be given.” (Emphasis supplied)

33. Having given due considerations to various aspects as aforesaid and to the limitation aspect pleaded by the appellant involving Rs. 30.00 crores and refund plea to the extent of Rs. 20.00 crores raised on behalf of the appellant in the course of hearing, as an interim measure to work out the modality for protection of interest of revenue, following decision of Apex Court in Dunlop India’s case – 1985 (19) E.L.T. 22 (S.C.), we direct the appellant to make pre-deposit of Rs. 70.00 crores (Rupees seventy crores only) within 4 (four) weeks of receipt of this order and make compliance on 30-9-2009. Subject to such compliance, realisation of balance demand shall be stayed till disposal of appeal.

(Pronounced in the open Court on 31-7-2009)

NF