2025-VIL-1868-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax – Rule 3 of Export of Service Rules, 2005 – Rule 2(e) of Cenvat Credit Rules, 2004 – Providing of business auxiliary services – Demand of tax – Sustainability – Appellant is engaged in manufacture and sale of Zippers and parts thereof in India and to neighboring countries – Based on audit objections, department issued show cause notice to Appellant by proposing demand of service tax and recovery of Cenvat Credit – Commissioner confirmed demands as proposed in show cause notice – Whether Business Auxiliary Services provided by Appellant to foreign located company qualify as ‘export of service’ under Rule 3 of the Rules – HELD – In terms of various agreements signed by Appellant with group companies, Appellant was obligated to act as an agent of such group companies and facilitate sale of their products in India. Appellant only procures orders from Indian customers and submits these orders to group companies for making supply directly to Indian customers and in that process, Appellant receives commission in foreign currency. Service of identifying Indian customers for procurement of various goods at behest of foreign entity is the service provided by a foreign entity and such service provided by a person in India is consumed and used by a person abroad and therefore, it has to be treated as ‘export of service’. Demand of service tax under Business Auxiliary Service is not sustainable - Trading activity – Eligibility to avail credit – Whether Appellant is eligible to avail Cenvat Credit on trading activity – HELD – Commissioner had confirmed demand of credit for period 2008-09 to 2009-10. Under Rule 2(e) of the Rules, trading cannot be treated as an ‘exempted service’ for period prior to 1-4-2011 and Explanation added on 1-4-2011 was prospective and not retrospective. Demand on this account is not sustainable. Order under challenge is set aside.
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