2015 (5) TMI 742 - HC - Service Tax

Export of services - Non-availabity of exemption notification during the period 1.3.2003 to 19.11.2003 - Contravention of the provisions of Section 68 - Penalty u/s 76 & 78 - exemption granted under Notification No. 21/2003-ST - Held that - It is indisputable position that the respondent assessee was being allowed and had the benefit of exemption of service tax under Notification No.6/99 till it was rescinded on 1.3.2003. Also a circular had been issued clarifying that the service tax is not leviable on export of services. Subsequently exemption has been reinstated to the services wherein consideration was being received in convertible foreign exchange. - clients who were serviced were residents abroad, and as such the services rendered to them being export services can hardly be amenable to any debate. The service being exempted from payment of service tax is also clear from two exemption notifications No.6/99 and 21/03, consideration for the same being received by the respondent assessee in convertible foreign exchange in India - Decision in the case of Commissioner of Service Tax, Mumbai-III Versus M/s. SGS India Pvt. Ltd. 2014 (5) TMI 105 - BOMBAY HIGH COURT followed - decision for the reasons given by the Tribunal can hardly be faulted with. - Decided against Revenue.

Summary

Issues Involved:
1. Applicability of service tax on services rendered by the respondent to overseas clients.
2. Retrospective applicability of exemption notifications and circulars.
3. Classification of services as export services and their taxability.

Detailed Analysis:

1. Applicability of Service Tax on Services Rendered by the Respondent to Overseas Clients:
The respondent, M/s Maersk India Pvt Ltd, provided taxable services as a Steamer Agent to overseas clients and received consideration in convertible foreign exchange. Initially, these services were exempt from service tax under Notification No. 6 of 1999 dated 19th April 1999. However, this exemption was withdrawn on 1st April 2003 and reinstated on 20th November 2003 under Notification No. 21 of 2003. The Service Tax Authority issued a show cause cum demand notice for the period from 1st November 2003 to 19th November 2003, demanding service tax, interest, and penalties. The respondent argued that the services were export services and thus exempt from service tax, as they received consideration in convertible foreign exchange.

2. Retrospective Applicability of Exemption Notifications and Circulars:
The Commissioner of Service Tax confirmed the demand for tax and interest but dropped the penalty. The Tribunal, however, set aside the Commissioner's order, leading to the revenue's appeal. The appellant contended that the services rendered in India were taxable and that the exemption notification dated 20th November 2003 did not cover the period from 1st November 2003 to 19th November 2003. The appellant further argued that the circular dated 25th April 2003, which clarified that export services remained exempt even after the withdrawal of Notification No. 6/99, did not apply to the respondent's case.

3. Classification of Services as Export Services and Their Taxability:
A similar issue was previously decided in the case of Commissioner of Service Tax Mumbai Vs SGS India Pvt Ltd, where the High Court held that services rendered to foreign clients, even if performed in India, constituted export services and were exempt from service tax. The Tribunal and the High Court found that the services provided by the respondent were consumed abroad, and the consideration was received in convertible foreign exchange, qualifying them as export services. The Tribunal's view was consistent with the statutory provisions and circulars, which exempted export services from service tax. The High Court reiterated that service tax is a destination-based consumption tax, applicable only to services provided within the country.

Conclusion:
The Tribunal correctly concluded that the services rendered by the respondent to foreign clients were export services and thus exempt from service tax. The High Court upheld this view, emphasizing that the services were consumed abroad and paid for in convertible foreign exchange. The appeal by the revenue was dismissed, affirming that the respondent's services were outside the purview of service tax due to the exemption notifications and the nature of the services as export services.