Service Tax Not Payable On Commission Received From Foreign Universities For Promoting & Publicizing Business In India: CESTAT

The Bench of Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that “the assessee is held not liable to pay service tax with reference to foreign Consultancy Income i.e. the income received from foreign universities for promoting and publicizing their business in India.”

In this case, the assessee/appellants entered into an agreement with various foreign education service providers for arranging or facilitating recruitment of students as their education agent in lieu of a commission termed as agents fee/consultancy income from the activities agreed to be performed by the assessee.

The assessees were not paying service tax on the commission received by them from the foreign universities/institutes, for arranging and facilitating provision of Student Recruitment Services to be provided in India to various foreign universities/institutes.

The department formed an opinion that the assessees were providing intermediary services of arrangement and facilitation of student recruitment services to foreign education service providers in India.

It is alleged that the assessees were liable to pay service tax on the commission received by them for the said activity. It is alleged that the said activity is taxable, however, the assessee has not paid the service tax.

The assessee submitted that Rule 9 of place of Provision of Rules, 2012 has wrongly been applied by wrongly presuming that the assessee while facilitating the student's recruitment services to foreign education service providers, since is located in taxable territory and is recruiting students of taxable territory only, the location of service recipient is irrelevant.

The department submitted that the activity of the assessee cannot be called as “Export of Service”. Hence it is rule 9 of Place of Provision of Service Rules, 2012 which is applicable with respect to Intermediary Service Provider. According to said rule the location of service provider is relevant for the purpose of taxability. The assessee, service provider, lies in taxable territory hence the demand of service tax on foreign consultancy income, irrespective received in convertible foreign exchange, has rightly been confirmed against the assessee.

The Tribunal opined that “NNCCPL has been registered with the Service Tax department and has been filing its service tax returns regularly. Payment of Service Tax as applicable on them has clearly been discharged by them vis-à-vis domestic consultancy Income and Coaching Services. The assessee is held not liable to pay service tax with reference to foreign Consultancy Income i.e. the income received from foreign universities for promoting and publicizing their business in India.”

The bench held that there is no evasion of tax, question of having any intent to evade is redundant when the tax is already paid. Thus, the show cause notice is barred by time.

Assessee/appellants are wrongly held as intermedia in terms of Rule 2(f) of Place of Provision Rules, 2012. The services rendered amounts to “Export of Service” in terms of Rule 6A of Service Tax Rules. Hence Rule 9 of Place of Provision Rules has wrongly been invoked, added the Tribunal.

In view of the above, the Tribunal allowed the appeal.

Case Title: TC Global India Pvt. Ltd. v. Additional Director General, DGCEI, New Delhi

Case Number: Service Tax Appeal No. 51355 of 2017

Counsel for Appellant/ Assessee: B.L. Narasimhan and Kunal Agarwal

Counsel for Respondent/ Department: Jayakumari

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