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In terms of a Market Development Agreement, a company of Singapore, i.e., MO, appointed appellant to provide various technical support services including marketing of products in India and to identify services to be provided by the appellant — Both MO and appellant were wholly-owned subsidiaries of Microsoft Corporation — Appellant claimed that services provided by it fell under export of services, for which it was not liable to pay service tax — Difference of opinion over this issue between Member judicial and Member judicial (technical) — The matter referred to the Larger Bench.
Facts:
The appellant was a subsidiary of Microsoft Corporation, Washington and provided product support services, consulting services, did marketing of Microsoft products, and other inter-company services.
The appellant claimed that the said services provided by them fell in the category of export of services for which it was not liable to pay service tax. It also claimed that the income earned on account of maintenance and repair of software was not chargeable to service tax in its hands.
The Revenue argued that no service was provided outside the defined territory, and hence there was no export of service at all made by the appellant.
Held:
The adjudicating authority held that as per the agreement, business support was provided by the appellant to the Singapore concern; and that such services were provided in India and were never provided outside India and therefore there was no export of service. According to the Member judicial, the principle of equivalence applied for sale of goods outside India should also be applied to services provided outside India. Therefore, in present case appellant’s services will not qualify to be export of services.
On the other hand, the Member judicial (technical) was of the opinion that while interpreting rules on such ambiguous subject it is necessary that an interpretation that is consistent to deliver the intention of the law-makers should be adopted. Accordingly, the business auxiliary services provided to promote sale for products of Microsoft operations in Indian market should be considered to be delivered outside India. According to the Member, the theory of equivalence did not exactly apply between taxation of export of goods and services. The above difference of opinion led to the matter being referred to the Larger Bench.
