2007 (12) TMI 170 - AT - Service Tax

Tax wrongly paid on the commission got from foreign Co. through Indian railways under Business Auxiliary service - Rule 3 of Export of Services Rule, exempts export of service - contract reveals that the appellant would be paid USD equipment to non-convertible Indian Rupee at the Rate of Exchange prevailing on the date of supply order - equivalent amount of foreign exchange payable to the appellant was not released to the Indian Railways, so appellant complied with Rule 3(1)(b) refund allowed

Summary

Issues:
Appeal against rejection of refund claim on Business Auxiliary Services.

Analysis:
The appellant, an agent of General Motors Corporation USA, provided services of sourcing contracts from Indian Railways. The appellant wrongly paid service tax on the commission received from General Motors Corporation and sought a refund. The adjudicating authority rejected the claim citing Rule 3(1)(b) of the Export of Services Rule, 2005. The Commissioner (Appeals) upheld the decision.

The appellant argued that they received the commission in Indian rupees instead of convertible foreign exchange, as Indian Railways deducted the commission from bills raised to General Motors Corporation for releasing less foreign exchange from the Reserve Bank of India. The appellant contended that this did not violate Rule 3(1)(b) of the Rules.

The revenue representative countered, stating that the appellant indeed received the commission in Indian rupees, which falls under Rule 3 of the Rules. The proviso to Rule 3 specifies that export of service is recognized only if payment is received in convertible foreign exchange.

Upon review, it was found that the appellant was supposed to receive payment in convertible foreign exchange from General Motors Corporation through Indian Railways. However, as Indian Railways deducted the commission from bills, the equivalent amount of foreign exchange was not released. This led to the conclusion that the appellant complied with the provisions of Rule 3(1)(b) of the Rules.

The Tribunal held that the denial of the benefit of Rule 4 was unjustified. The impugned order was set aside, and the appeal was allowed with consequential relief. The decision was based on the interpretation of legislative intent and the fulfillment of conditions under the relevant Rules.

In conclusion, the appellant's appeal against the rejection of the refund claim on Business Auxiliary Services was allowed by the Appellate Tribunal CESTAT, New Delhi, based on the interpretation of the relevant Rules and the specific circumstances of the case.