Involute Engineering Pvt. Ltd. Vs Commissioner of Central Excise And Service Tax (CESTAT Delhi)
Conclusion: Assessee had no liability to pay service tax on the commission received in convertible foreign currency as the only requirement after the amendment in rule 3 (2) of the Export Service Rules 2005 was that the service recipient should be situated outside India and consideration should be received in foreign currency which both are satisfied.
Held: Assessee-company was engaged in rendering ―business auxiliary service and represented various foreign companies in India, in lieu of which it received commission. The services rendered by assessee include procurement of orders for foreign companies; assistance in participation of tenders; negotiation with customers; collection of payments; and liaising activities. Assessee did not discharge service tax on the commission received in convertible foreign currency as it believed that the services rendered by it to foreign companies amounted to export of service under the ―Export of Service Rules, 2005. During the course of audit of the records of assessee for the period January, 2006 to March, 2009, the officers noticed that assessee had received commission from abroad during the period from 2004-05 to 2008-09, which appeared to be taxable under BAS. Accordingly, AO held that assessee was liable to pay service tax since the services rendered by assessee might not tantamount to export of service under the 2005 Rules for the reason that though the services were rendered to foreign companies, but the same were provided and used in India. The only point of dispute was as to whether the services were taxable in India or the same were export of service outside India in terms of Service Rules, 2005 and for this reason were not taxable in India. It was held even though the services had been performed in India, these services being Business Auxiliary Services were in respect of the business of the assessee’s principal located abroad. The only requirement after the amendment in rule 3 (2) of the Export Service Rules 2005 was that the service recipient should be situated outside India and consideration should be received in foreign currency. Both the conditions stood satisfied. Thus, there was no liability to pay service tax on Business Auxiliary Services.
