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2014 (9) TMI 874 - AT - Service TaxBusiness Auxiliary Services - Software design and development service - Reverse Charge Mechanism - Held that - As per the agreement entered into between TTL & TTL Korea and TDCVL, TTL and TTL Korea have to render Information Technology Services to TDCVL in Korea. The services rendered consist of two components - onsite services rendered by TTL Korea and offshore services rendered by TTL. Nevertheless, the service recipient remained TDCVL and not anybody else, for which they have paid the consideration. As per the agreement, the invoices for the services rendered are raised by TTL Korea on TDCVL for both onsite as well as offshore services. It is also confirmed by the Counsel that VAT/GST liability has been discharged by TTL Korea at the time of supply of services to TDCVL. If that be so, the question of subjecting the same transaction to Service Tax in India at the hands of TTL would not arise at all. As regards the offshore services rendered by M/s. TTL to TDCVL, the same amounts to export of service in terms of Rule 3(2)(a) of the Export of Service Rules, 2005. Information Technology Software service is classifiable under Rule 3(1)(iii) as category-3 service which relates to service consumed abroad by the recipient who is situated outside India. To consider the transaction as export, two conditions have to be satisfied namely the service should be provided from India and should be used outside India and the consideration for the services rendered should be received in convertible foreign exchange. In the present case, it is not in dispute that these conditions have been satisfied for the offshore service rendered by TTL to TDCVL. - Matter remanded back - Decided in favour of assessee.
Issues involved:
1. Liability to pay Service Tax on services rendered abroad. 2. Classification of services as onsite and offshore. 3. Applicability of Reverse Charge Mechanism. 4. Consideration for services received in convertible foreign exchange. 5. Whether services rendered qualify as "export of service" under Rule 3(2)(a) of the Export of Service Rules, 2005. Detailed Analysis: 1. The appellant, engaged in providing software services, entered into a tripartite agreement for SAP software implementation in Korea. The department demanded Service Tax under Reverse Charge Mechanism. The appellant argued that since services were rendered in Korea, they are not taxable in India, and VAT/GST liability was discharged in Korea. 2. The services provided had two components - onsite and offshore. The appellant contended that offshore services, rendered by them to a foreign entity in Korea, should be considered as "export of service" as they received consideration in convertible foreign exchange. They argued that Section 66A does not apply as there was no service receipt in India. 3. The Revenue maintained that the appellant must pay Service Tax under Reverse Charge Mechanism as services were rendered by TTL Korea to the appellant, and consideration was received from TDCVL. The Tribunal noted that the service recipient was TDCVL, and VAT/GST liability was discharged in Korea. 4. The Tribunal referred to a clarification by C.B.E. & C. in a similar case, stating that onsite services rendered abroad are not treated as services provided from India. It was emphasized that subjecting such transactions to Service Tax in India is not applicable. 5. The Tribunal found that the offshore services rendered by the appellant to TDCVL qualified as "export of service" under Rule 3(2)(a) of the Export of Service Rules, 2005. The conditions for export were satisfied, and the matter required fresh consideration by the adjudicating authority. The appellant was directed to provide evidence of VAT liability discharge in Korea. In conclusion, the Tribunal allowed the appeal by way of remand, directing a fresh examination of all issues involved and the classification of services as "export of service." The stay application was also disposed of.
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