On 29 October, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, held that commission received from foreign suppliers for procuring orders and promoting their products in India qualifies as export of services when the foreign suppliers are the service recipients and the place of provision is outside India.
A Bench comprising Officiating President Dr. Rachna Gupta and Technical Member P.V. Subba Rao allowed the appeal filed by DSS Image Tech Pvt. Ltd., holding that the department had also wrongly invoked the extended period of limitation without establishing wilful suppression with intent to evade tax. The Tribunal held:
“The foreign client was the service recipient and the appellant is the service provider. The amount quid pro quo for the said arrangement, that is the consideration is the commission received by the appellant in foreign exchange. […] The arrangement in question actually amounts to export of service being provided by the appellant to its foreign clients against the commission received in convertible foreign exchange, the said activity is not liable to tax.”
The dispute arose from an audit of the company's records for 2006-07 to 2010-11. The department alleged that the company promoted and marketed equipment supplied by foreign clients in India and that its activities were taxable as Business Auxiliary Services (BAS) under Section 65(105)(zzb) of the Finance Act, 1994.
A show cause notice dated 11 April 2012 proposed a service tax demand of Rs. 3,09,74,273. A second notice dated 22 October 2014 proposed a demand of Rs. 98,18,596 for July 2012 to March 2013, invoking the extended period of limitation and seeking interest and penalties. The adjudicating authority passed an order on 28 August 2025 covering four show cause notices, including these two. The company challenged the order before the Tribunal.
It submitted that it dealt in medical equipment and acted as a distributor for several foreign companies. It also worked as a commission agent for direct sales by foreign suppliers to Indian customers. It procured orders or enquiries from Indian customers and forwarded them to the foreign suppliers, who directly exported the goods to India.
Further, the company contended that the place of provision of its services was the location of its foreign clients and that it did not qualify as an intermediary under the Place of Provision of Services Rules, 2012. It also submitted that it had regularly filed service tax returns and bona fide treated its activities as exports. The department argued that the services were provided and consumed in India.
The Tribunal noted that the company assisted foreign suppliers in procuring orders and promoting their products. Its activities also included liaisoning, preparing documents, obtaining tenders and handling complaints. In return, it received commission in foreign exchange.
Examining Rule 6A of the Service Tax Rules, 1994, it considered the conditions for treating a service as an export, including the requirement that the place of provision be outside India. It also referred to Rule 3 of the Place of Provision of Services Rules, 2012, which generally determines the place of provision by reference to the location of the service recipient.
The Bench observed that the service recipient is the person who requests the service, is liable to pay for it and whose needs the service fulfils. It emphasised that the destination of a service depends on its place of consumption, rather than merely on where the service is performed.
Applying these principles, it held that the foreign clients were the service recipients and the company was the service provider. It found no evidence that the company had any further role in relation to Indian customers after procuring their orders and forwarding the information to its foreign clients.
It also found that the department had also failed to establish that the Indian customers were recipients of the company's services. Therefore, the Tribunal concluded that the arrangement constituted export of services and was not liable to service tax.
On limitation, the Bench noted that the company had regularly filed service tax returns and declared its activities as exports. It held that suppression could not be alleged without a positive act demonstrating wilful suppression. In the absence of evidence of deliberate concealment or intent to evade tax, the department could not invoke the extended period of limitation.
Accordingly, the CESTAT set aside the impugned order and allowed the appeal.
Counsel for Appellant: R. Krishnan, Advocate
Counsel for Respondent: Mahboob ur Rahman, Authorised Representative