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No Service Tax on Foreign Exhibitions: CESTAT’s Big Relief to Exporters

In a major relief for Indian exporters, the Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that no service tax is payable on foreign exhibition services conducted outside India.

This landmark decision came in the case of Sarup Industries Ltd, a footwear manufacturing and export company, and has set a strong precedent for businesses investing in global trade shows and marketing abroad.


What Sparked the Case?

The issue arose when Sarup Industries Ltd participated in foreign exhibitions during FY 2005–06 and 2006–07 to promote its products internationally.

The company spent around ₹5,72,027 on these events, which were organized outside India. Later, during a tax audit, authorities raised a demand for service tax, claiming that these activities qualified as Business Auxiliary Services under Indian service tax laws.

The department’s view was that even though the exhibitions were held abroad, since the company was based in India, service tax was applicable.


Sarup Industries’ Strong Stand: No Service Rendered in India

The company argued that:

The services (exhibitions) were entirely performed outside India.
There was no delivery, performance, or consumption of services within India.
Therefore, no service tax should apply under the Finance Act, 1994.

Their legal counsel emphasized that the sole purpose of attending these international exhibitions was to boost exports, which is encouraged by the Indian government.


CESTAT’s Decision: Fairness Prevails

After hearing the arguments, the CESTAT Bench—comprising Siddhartha Nautiyal (Judicial Member) and Narendra Prasad Sinha (Accountant Member)—ruled in favor of Sarup Industries Ltd.

The tribunal held that:

The foreign exhibitions were conducted outside Indian territory.
The services were not consumed or rendered in India.
There was no territorial nexus to justify imposing service tax.

Thus, the tax demand was set aside, and the company was granted relief.


Why This Ruling Matters for Exporters & Businesses

This case has far-reaching implications for:

Exporters who participate in global trade fairs, exhibitions, and overseas marketing.
Service providers offering or availing services outside India.
Companies facing disputes over the place of service consumption.

The ruling reinforces the principle that Indian service tax laws cannot extend to services performed entirely abroad, unless specifically covered under the law.


Key Takeaways for Businesses:

Know your tax obligations: Not all services involving foreign vendors or events attract Indian service tax.
Place of Service is Crucial: Always check where the service is actually performed, delivered, or consumed.
Exporters gain relief: Participating in international exhibitions is vital for exporters and should not be penalized by unjust tax demands.
Documentation matters: Maintain proper records of all overseas activities to avoid future disputes.


Relevance in the GST Era

While this case pertains to the pre-GST Service Tax regime, the underlying principle of “Place of Supply” remains relevant under GST laws too.

Under GST, the Place of Supply determines whether a service is considered domestic or export—and similar disputes can still arise today.


Conclusion: A Win for Global Business Aspirations

The CESTAT’s decision provides clarity and justice for businesses that are investing in global expansion through exhibitions and trade fairs.

It highlights the importance of territorial limits in taxation.
It encourages Indian exporters to showcase their products abroad without fear of unjust tax liabilities.
It sends a strong message: Compliance must be fair, transparent, and in line with the law.


FAQs

Q1: What is the key takeaway from this CESTAT ruling?
Foreign exhibition services performed outside India are not liable for service tax under Indian law.

Q2: Who benefits from this decision?
Exporters, manufacturers, and businesses that participate in international exhibitions.

Q3: Does this ruling apply under GST too?
The principle of Place of Supply under GST follows similar logic, though GST has its own specific rules.

Q4: How much was the disputed service tax amount?
The tax authorities raised a demand of around ₹5.72 lakh for exhibition expenses.

Q5: What can businesses learn from this case?
Ensure legal clarity, proper documentation, and accurate interpretation of tax laws for international activities.

📅 Published on: 11 July 2025
✍️ Author: CS Chhavi Goyal