In the famous Microsoft case reported by us almost three years ago,due to divergent views of the Members constituting the Division Bench, the following was the difference of opinion framed for decision by the Third Member -
(i) Whether the impugned Business Auxiliary Service of promotion of market in India for foreign principal made in terms of Article 2 and 3 of the Agreement dated 01/07/2005 amounts to export of service considering Article 286 (1) (b) of the Constitution of India read with Apex decisions in the case of State of Kerala and Others Vs. The Cochin Coal Company Ltd. - (1961) 12 STC 1 (SC) , Burmah Shell Oil Storage and Distributing Co, of India Ltd. and Other Vs. Commercial Tax Officers and Others - 2002-TIOL-966-SC-CT-CB and the provisions of Export Service Rules, 2005 as well as Circular No. 141/10/2011 - TRU dated 13.05.2011 issued by CBE & C?(ii) Whether the impugned Business Auxiliary Service of promotion of market in India for foreign principal made in terms of Article 2 and 3 of the Agreement dated 01/07/2005 was delivered outside India and used thereat and is immune from levy of service tax as export of service in terms of the provisions of Export Service Rules, 2005 read with circulars issued by CBE & C excluding Circular No.141/10/2011 - TRU dated 13.05.2011?(iii) Whether the impugned Business Auxiliary Service provided in terms of Agreement dated 01/07/2005 is governed by the principles of equivalence and destination based consumption tax as well as law laid down by Apex Court in All India Federation of Tax Practitioners - 2007-TIOL-149-SC-STand Association of Leasing and Financial Services Companies Vs. UOI - 2010-TIOL-87-SC-ST-LB.(iv) The Appeal in Appeal No. ST-828/2010 without being argued by both sides whether can be said to have involved the issue that output service was exported or conclusion is to be arrived at upon hearing both sides?(v) Whether demand for the normal period sustains subject to grant of cum-tax benefit and CENVAT Credit?
We had reported this order as - 2011-TIOL-1508-CESTAT-DEL.
The Third Member has passed an order recently.
After hearing lengthy submissions by both sides, the Member (J) inter alia observed that in view of the Majority decision in Paul Merchants Ltd. - 2012-TIOL-1877-CESTAT-DEL it has to be held that services were being exported in terms of Export of Services Rules, 2005 and not liable to Service Tax.
The third Member also observed –
++ Even otherwise also, I find that the disputed service is the service being provided by the appellant to his principal located in Singapore. The marketing operations done by the appellant in India cannot be said to be at the behest of any Indian customer. The service being provided may or may not result in any sales of the product on Indian soil. The transactions and activities between the appellant and Singapore principal company are the disputed activities. As such, the services are being provided by the appellant to Singapore recipient company and to be used by them at Singapore, may be for the purpose of the sale of their product in India, have to be held as export of services.
Noting that in the case of Larsen & Toubro - 2013-TIOL-1458-CESTAT-DEL it is held that a majority decision is Larger Bench decision having the same binding criteria as that of Larger Bench, the Member (J) opined that the majority decision in the case of Paul Merchants is required to be followed.
The third Member also adverted to the decisions in Gap International Sourcing (India) Pvt. Ltd.- 2014-TIOL-465-CESTAT-DEL, Vodafone Essar Cellular Ltd.- 2013-TIOL-566-CESTAT-MUM, Bayer Material Science Pvt. Ltd.- 2014-TIOL-1084-CESTAT-MUM to conclude that Business Auxiliary services provided by the appellant to their principal company located in Singapore is to be considered as export of services.
Observing that the Revenue representative had not brought to notice any decision which is contrary to the law declared in the above referred decisions, the third Member agreed with the findings of the Member (Technical) of the referral Bench.
Inasmuch as the services provided by the appellant are covered by the Export of Service Rules, 2005 and are not liable to service tax is the Majority view.
The Appeal was allowed.