The Allahabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that benefit of export of services could not be extended to an intermediary located in India.
The bench of P.K. Choudhary (Judicial Member) and Sanjiv Srivastava (Technical Member) has observed that in case of intermediary, it is the location of services provider which is considered as place of provision of services for the purpose of levy of service tax for the period when the appellant is covered by the definition of the intermediary, the place of provision of service, the location of service provider i.e. the taxable territory of India.
The appellant/assessee is registered with the Service Tax Department and is regularly paying Service Tax on the services provided by it. The Appellant is in the business of guiding and advising the foreign parties for bidding and negotiations. The Appellant provides them with details of customers in India and information related to domestic market conditions so as to enable the foreign parties to prepare appropriate quotes for their customers so that the foreign parties can carry out the actual negotiations themselves.
The Appellant entered into Agreement with M/s Werner Pfleiderer & Gmbh Co. KG, Germany and M/s Coperion Waeschle Gmbh & Co. KG, Germany dated 01.01.2007. The sequence of events as traced from the impugned Agreement is that; first the Appellant interacts with the customers in India, who place their orders with the group entity. The group entity exports the goods from Germany to the customers in India and raises the invoices directly on the customers.
These orders materialize only when the acceptance or confirmation has been issued by the group entity to the customers and the Appellant cannot confirm these orders. Upon confirmation of the order, materials are dispatched to the customers directly by the group entity and payment related to the materials are dealt with directly by the buyer and the group entity.
Thus, the Appellant‟s role is limited to acting as a bridge between the foreign parties and their customers in India and does not involve acceptance or confirmation of any order. The Appellant raises invoices for its commission on foreign parties in Germany as soon as the group entity informs the Appellant of having received the payment from the customer in India. The commission is based on an agreed percentage depending on the value of the goods sold and the same is paid by the group entity in convertible foreign currency.
Documents evidencing the fact that the payment was received by the Appellant in convertible foreign currency have been enclosed as Annexure-6 of the paper book. During the course of AGUP Audit and Departmental Audit, it was observed that the Appellant acted as a Commission agent for two foreign based companies, in pursuance of which Show Cause Notice was issued demanding service tax under “Business Auxiliary Service‟ on the commission received by the Appellant for the period from April, 2007 to June, 2012.
The Commissioner passed an order which was subsequently set aside by the Tribunal.
The tribunal concluded that appellant are receiving payment against the provisions of these services in convertible foreign exchange. Thus, these services would qualify to get the benefit of export of services as per Rule 6 of the Service Tax Rules, 1994. Thus, there cannot be any levy of service tax and the demand made by the impugned order needs to be set aside.
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Case Details
Case Title: M/s Coperion Ideal Pvt. Ltd. Versus Commissioner of Service Tax, Noida
Case No.: Service Tax Appeal No.70054 of 2017
Date: 16/01/2025
Counsel For Appellant: Atul Gupta
Counsel For Respondent: Chitra Srivastava