2014 (1) TMI 665 - AT - Service Tax

Export of service or not - Management, maintenance or repair service - Waiver of pre deposit - Held that - appellant has, prima facie, satisfied the said condition also inasmuch as the benefit of repairs and maintenance was enjoyed by the service recipient only when the vessels were in voyage. However, an amendment to the Export of Service Rules w.e.f. 27/02/2010 is found to be adverse to the appellant inasmuch as, as per this amendment, the service, to be held to have been exported, should have been performed outside India. In the present case, admittedly, the service was performed within India and hence the appellant is liable to pay service tax on the service for the period from 27/02/2010 - Conditional stay granted.

Summary

Issues:
1. Whether the service provided by the appellant to marine vessels owned by foreign companies during 2005-06 to 2009-10 can be considered as exported service.
2. The impact of an amendment to the Export of Service Rules w.e.f. 27/02/2010 on the liability of the appellant to pay service tax.
3. Applicability of Section 78 of the Finance Act in the case.

Analysis:
1. The appellant sought waiver and stay regarding the demand on 'management, maintenance or repair service' provided to marine vessels owned by foreign companies during 2005-06 to 2009-10 from their SEZ unit. The service involved repairing and maintaining electronic equipment on-board the vessels in Indian territorial waters. The primary issue was whether this service could be considered as exported. The Tribunal noted that one condition for export, receiving consideration in foreign exchange, was met. The second condition required showing the service was used outside India. The Tribunal found that the benefit of repairs and maintenance was enjoyed by the service recipient only when the vessels were in voyage, indicating usage outside India. However, an amendment to the Export of Service Rules from 27/02/2010 required the service to be performed outside India for export status. As the service was performed within India, the appellant was held liable to pay service tax from 27/02/2010 onwards, amounting to around Rs.62,000.

2. The Tribunal, after considering the applicability of Section 78 of the Finance Act, directed the appellant to predeposit Rs.1 lakh towards the apparently sustainable part of the demand of service tax and penalty within six weeks. Compliance was to be reported to the Deputy Registrar, with further reporting to the Bench. Upon due compliance, waiver and stay were granted for the balance dues.

3. In conclusion, the Tribunal found that while the appellant had prima facie satisfied the conditions for export of service, the subsequent amendment to the rules changed the criteria, leading to a liability for service tax. The Tribunal's decision emphasized compliance with the predeposit requirement and the subsequent waiver and stay of the balance dues, based on the applicable provisions of the Finance Act.