2014 (7) TMI 708 - AT - Service Tax

Sanction of rebate of services tax - Export of services - Scientific and Technical Services - Revenue contends that Business Support Service and cannot be considered as Scientific or Technical Consultancy Services - and Revenue contends that GE ITC is extended arm of GE USA - Held that - GE USA is incorporated under the laws of State of New York and GE ITC is a company incorporated under the Companies Act 1956. This itself shows that both are separate entities. No other evidence has been taken into account to show that GE ITC is an extended arm. Even if it is a subsidiary company, as submitted by the learned counsel, a subsidiary company is considered as a separate entity in the eyes of law. Therefore GE ITC is not an extended arm for GE USA. - Decided against Revenue. Classification of service - Business support service or Scientific and Technical Services - Held that - appellants are providing a cluster of services and are receiving consideration in the form of cost plus 5% and therefore it has to be held that the service provided is Business Support Service cannot be upheld since for classification, the method by which consideration is determined cannot be the basis. The basis has to be the fact that the services provided should fit into the definition of the service under which it is supposed to be categorized - On the one hand it is appellants claim that they are providing only Scientific and Technical Analysis and specific evidence as regards why any activity of the appellant comes under Business Support Service by explaining the nature of the activity vis- -vis the definition so pointed out to us. Therefore prima facie this view cannot be supported. Moreover as submitted by the learned counsel, subsequently Revenue itself has issued show-cause notice proposing classification of the services as Scientific and Technical Service. - Decided against Revenue. Non compliance of conditions laid down in Rule 3(2) of Export of Services Rules 2005 - Held that;- Following decision of Gap International Sourcing (India) Pvt. Ltd. and Paul Merchants Ltd. it cannot be sustained that conditions laid down in Rule 3(2) of Export of Services Rules 2005 are not satisfied - Decided in favor of assessee. Cenvat Credit - Nexus between input and output service - Held that - this aspect was not considered by the lower authorities - though appeal is allowed on merit, matter remanded back to verify the nexus between input and output service and allow the refund claim within 3 months.

Issues Involved:
1. Preliminary Objection on Jurisdiction
2. Classification of Services
3. Nature of Agreement between GE USA and GE ITC
4. Method of Determining Consideration
5. Compliance with Rule 3(2) of the Export of Services Rules, 2005
6. Nexus between Input Services and Output Services

Detailed Analysis:

1. Preliminary Objection on Jurisdiction:
The learned AR raised a preliminary objection citing the Tribunal's decision in the case of Glyph International Ltd., where it was held that rebate claims on service tax cannot be considered by the Tribunal. However, the learned counsel for the appellant countered that the Hon'ble High Court had set aside this decision, allowing the Tribunal to decide on the matter. Consequently, the preliminary objection was rejected, and the appeal was taken up for hearing.

2. Classification of Services:
The appellant, GE India Technology Centre Pvt. Ltd., argued that their services should be classified as 'Scientific or Technical Consultancy Services' rather than 'Business Support Service'. The Tribunal noted that the Revenue itself had classified similar services in subsequent periods as 'Scientific or Technical Consultancy Services'. The Tribunal found that the appellant's activities, as per the agreement, involved research and development and the submission of reports, aligning with the classification of 'Scientific or Technical Consultancy Services'. The Tribunal relied on the decision in Gap International Sourcing (India) Pvt. Ltd. Vs. CST, which supported the appellant's classification.

3. Nature of Agreement between GE USA and GE ITC:
The Revenue contended that GE ITC was an extended arm of GE USA, established to look after GE USA's interests in India. However, the Tribunal found no evidence supporting this claim. The agreement indicated that GE USA and GE ITC were separate legal entities, and even if GE ITC was a subsidiary, it would still be considered a separate entity in the eyes of the law. The Tribunal concluded that GE ITC was not merely an extended arm of GE USA.

4. Method of Determining Consideration:
The Revenue argued that the consideration method (cost plus 5%) indicated that the services should be classified as 'Business Support Service'. The Tribunal disagreed, stating that classification should be based on the nature of the services provided, not the method of determining consideration. The Tribunal found no specific evidence to support the classification of the appellant's services as 'Business Support Service'.

5. Compliance with Rule 3(2) of the Export of Services Rules, 2005:
The Tribunal addressed the Revenue's observation that the conditions under Rule 3(2) were not satisfied. The Tribunal relied on the decisions in Paul Merchants Ltd. Vs. CCE and Gap International Sourcing (India) Pvt. Ltd., which clarified that if the beneficiary is abroad and the service is used abroad, it qualifies as an export of service. The Tribunal found these decisions applicable to the appellant's case, thus rejecting the Revenue's observation.

6. Nexus between Input Services and Output Services:
The Tribunal noted that the issue of nexus between input services and output services needed to be addressed. The appellant's counsel suggested that this could be decided by the original authority in accordance with a previous order (order-in-appeal No. 139/2013). The Tribunal found this submission reasonable and directed the original authority to verify documents and quantify amounts, ensuring that the admissible refund is sanctioned within three months from the date of communication of the order.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the original authority with specific directions for verification and quantification. The Revenue's appeal was deemed infructuous and rejected, as the original authority had already implemented the order under challenge, leading to parallel litigation. The Tribunal directed the original authority to complete the process within three months, ensuring timely resolution.

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