Whether Promotion or marketing of CRS services being provided to overseas entity are covered under Business Auxiliary Services or not?

PJ/CASE LAW/2015-16/2947

Case:- ABACUS DISTRIBUTION SYSTEMS (INDIA) (P) LTD. Versus COMMR. OF S.T., MUMBAI-I

Citation:- 2015 (40) S.T.R. 190 (Tri. - Mumbai)

Brief facts:-In the present case demands were confirmed with interest and penalties imposed on the ground that during the period in dispute i.e. July, 2003 to March, 2010 the appellants provided Business Auxiliary Service and had not paid the appropriate Service Tax.
Brief facts of the case are that the appellants are undertaking marketing and promotion of Computer Reservation System (CRS) Software by M/s. Abacus Singapore, the foreign entity vide Agreement dated 6-6-1996. The said software performs various functions including airline seat reservations, schedules, booking for a variety of air, car and hotel services, automated ticketing and fare displays. The appellant is appointed as National Marketing Company to provide services for the marketing and promotion of Abacus CRS Software in India.

Respondent’s contention:- Revenue is of the view that the activity undertaken by the appellant amounts to providing Business Auxiliary Service.
They find that this issue is now settled by the decision of the Tribunal in the case of M/s. Acquire Services Pvt. Ltd.v CST, Delhi in Appeal No. 841/2010 [2014 (36)S.T.R.1148 (Tri.-Del.)] vide final order dated 3-6-2014 whereby a demand which was confirmed on similar grounds were set aside by the Tribunal and the Tribunal held as under :-
“21.      The assessees provided services amounting to marketing of CRS, conceived, developed and owned by overseas entities, in India, by employing computer processes amounting to data processing. This the assessees did by processing information/data generated by their accredited travel agents in India and uploading the same to overseas located computer systems, which maintain and process the master data of the overseas entities. Assessees also identify and provide access to relevant segments of travel related data in the CRS to local travel agents by acting as an interface with the overseas computer systems and the composite data maintained and processed therein, by computer data processing.
22.       In our considered view services provided by assessees to the overseas entities (Amadeus/Galileo) clearly amount to promotion or marketing of CRS services of the overseas entities (a BAS), but nevertheless falls outside the ambit of BAS as defined, since these services were provided by employing computer data processing, an excluded component.
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26.       Another issue is whether services provided by assessees amount to export of services, within the ambit of the 2005 Rules. The Larger Bench of the Tribunal in Paul Merchants Ltd.v. CCE, Chandigarh - 2013 (29)S.T.R.257 (Tri.-Del.); followed in M/s. GAP International Sourcing (India) Pvt. Ltd.v. CST and in the recent decision dated 13-3-2014 in M/s. Alpine Moduler Interior Pvt. Limitedv. CST (Adjudication, New Delhi, explains, in a BAS context, that where the service recipient is located outside India; this taxable service is delivered and used outside India; and payment of such service provided outside India is received by the India service provider in convertible foreign exchange, the service falls within the ambit of the 2005 Rules; and is admissible to benefits thereunder. The decision of the Larger Bench in Paul Merchants Limited, particularly in the context of the facts on the basis of which the said decision was pronounced, explain the scope of relevant provisions of the 2005 Rules. From the decisions referred to supra it is clear that activities of assessees fall within the scope of the 2005 Rules. Consequently, there is no liability to Service Tax.
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31.       Conclusions :
We hold that :
(a)       Services provided by assessees during 1-7-2003 to 1-5-2006 fall outside the ambit of BAS; and
(b)       Both prior and subsequent to 1-5-2006 (covering the entire periods in issue), assessees are entitled to the benefits under the Export of Service Rules, 2005. Consequently, appeal preferred by assessees are liable to be allowed.”
In view of the above decision of the Tribunal which is squarely applicable to the facts of the present case, the impugned orders are set aside and the appeals are allowed.

Decision:- Appeals allowed.

Comment:- The crux of the case is that promotion or marketing of CRS services is being provided to overseas entity by employing computer data processing. This activity is not covered under Business Auxiliary Services. Service is delivered to recipient located outside India and is also used outside India. Payment of service is received in convertible foreign exchange. This activity amounts to ‘export of service’ and the appellant shall not be liable to pay tax.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/2947

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