2014 (5) TMI 1070 - AT - Service Tax

Services rendered in Nepal - Export of services - Non receipt of foreign exchange - period from 1-4-2004 to 31-3-2009 - Maintenance and Repair Services and Installation and Commissioning Services provided - Held that - Prima facie, even if the service provider is in India and exporting the services to Nepal, but not receiving the value of service in convertible foreign exchange, would still be eligible to the benefit under the Export of Services Rules, 2005. The issue of limitation raised by the applicant is a mixed question of facts and law and to arrive at the conclusion that the demand is barred by limitation, necessary evidences adduced before the authorities have to be scrutinized, which would be done at the time of disposal of the appeal. - 25% of demand ordered to be deposited - Partial Stay granted.

Summary

Issues:
1. Applicability of service tax on services rendered in Nepal.
2. Requirement of payment in convertible foreign exchange for service tax exemption.
3. Applicability of Export of Services Rules, 2005.
4. Consideration of limitation period for the demand.

Analysis:
1. The case involved a dispute regarding the imposition of service tax on services provided in Nepal by the appellant. The appellant argued that since the services were rendered outside India, no service tax should be levied. Reference was made to a previous Tribunal decision to support this argument.

2. The central issue revolved around the requirement of payment in convertible foreign exchange for exemption from service tax. The appellant contended that even though they received payment in Indian currency for services in Nepal, the actual services were paid for in Nepali currency. The Revenue argued that since payment was not in convertible foreign exchange, service tax was applicable.

3. The Tribunal examined the Export of Services Rules, 2005 to determine the conditions for service tax exemption. It was noted that the payment must be received in convertible foreign exchange for the service to qualify as an export of service. The Tribunal found that the invoices were raised in Indian rupees, and the Nepali currency did not meet the criteria of convertible foreign exchange.

4. Regarding the limitation period for the demand, the Tribunal stated that it was a mixed question of facts and law. The Tribunal directed the appellant to deposit 25% of the service tax demand within a specified period, failing which the appeal would be dismissed. The balance dues would be waived upon compliance, and recovery stayed during the appeal's pendency.

In conclusion, the Tribunal upheld the service tax demand on the services provided in Nepal due to the lack of payment in convertible foreign exchange. The judgment highlighted the importance of adhering to the conditions specified in the Export of Services Rules, 2005 for service tax exemptions.