Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/Case Law/2019-2020/3612

Does marketing/ Sales promotion services provided for parent concern located outside India qualify as Export of services?
M/s IBM India Pvt. Ltd. (CESTAT Bangalore) Final Order No. A/20017-20018/2018, Dated 01.01.2019
Issue: Does marketing/ Sales promotion services provided for parent concern located outside India qualify as Export of services?
Brief Facts:  M/s IBM India Pvt. Ltd. is engaged in providing taxable service under the category of Business Auxiliary Service (BAS).They entered into an agreement with M/s IBM, USA that they are appointed as IBM USA’s Business Partner in India for the purpose of marketing selected IBM products in India for which commission shall be paid in the convertible foreign currency. The work majorly consisted of procurement of orders and providing marketing support to identify and promote the products of IBM, USA in India. A Show cause notice was issued to M/s IBM India Pvt Ltd stating that services provided by IBM India therefore appeared to have been provided and consumed within India insofar as, promotion of sales, marketing of IBM products is concerned. So service tax needs to be provided on such Business Auxiliary services.
Applicant’s Contention:  The applicant stated that the services provided by them are ‘Export of Services’ in terms of Export of Service Rules, 2005 as they satisfy all the conditions required to qualify as export of service. The conditions are as follows
  1. Services provided are in relation to commerce or industry.
  2. The service recipient i.e. IBM USA is located outside India;
  3. The consideration for rendering the sale promotion activities is received in convertible foreign exchange;
  4. Such services have been delivered and used outside India based on the following reasons :-
.... The appellant promotes products of IBM USA by identifying specified customers for IBM products in India.
.... Based on identification of customers, appellant would get potential orders for IBM USA’s products.
.... Such orders are forwarded to IBM USA for its consideration.
.... IBM USA would analyze such orders and would then take a decision            whether to sell its goods to such customers. The decision with respect             to acceptance/rejection of an order is solely with IBM USA
Further reliance has been placed on Board’s Circular No. 111/05/2009-S.T., dated 24-2-2009 wherein the meaning of the phrase “used outside India” has been clarified in relation to different categories of taxable services. The relevant portion of the circular is being extracted as follows-
“Indian agents who undertake marketing in India of goods of a foreign seller. In this case, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign exchange.
….
For the services that fall under Category III [Rule 3(I)(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 [Rule 3(I)(iii)], 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.”
Moreover the appellant has quoted cases which contained similar facts and had been decided in favour of the assessee.
 
Reasoning of Judgement: After considering the submissions of both the parties, CESTAT has allowed the appeal in favour of the appellant stating that service tax shall not be applicable on the services as it qualifies for ‘export of service’. The reasoning provided by CESTAT is as follows
--It has been admitted that IBM USA doesn’t have any commercial or industrial establishment or any office in India.
--All the conditions in relation to ‘Export of Service’ are being satisfied.
--The rules only provide that recipient of service should be situated outside India and thus specifically acknowledges that export of service can be provided in India.
 
Comment:-  The issue being discussed relates to the period of 2005 to 2007. But we have entered the GST era and it has been three years since GST implementation. This case shall be of great help as we are all aware of the adverse Advance rulings being announced by the Authorities. One such ruling given is in the case of Vserv Global Private Limited wherein AAR observed that all the activities performed by applicant for its client indicate that the applicant is engaged in arranging/facilitating supply of goods and services between client and its customers and therefore, qualifying as an intermediary.
As per this AAR ruling, services provided by intermediaries should not be treated as ‘zero rated supplies’ has lead to litigation as the authorities would use it to slap taxes on many companies exporting services. The ruling may go against the GST law.
Prepared by- CA Akanksha Anchaliya
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com