2016 (8) TMI 589 - AT - Service Tax

Cenvat credit - Refund wholly owned subsidiary Export of call centre services remuneration given by the holding company whether the holding company is service recipient for the purpose of Rule 3(2) of the Export of Service Rules, 2005 or the customers situated in and outside India Held that - service tax is a destination based consumption tax , the test to be applied for ascertaining the actual consumer of service is the person who pays for the service and not the person who benefited from the service. Holding company paid for the services and will be regarded as recipient of service. Export of services Held that - the person availing the service and paying for the service is the ultimate beneficiary of service and since the recipient of service is located outside India, provision of service by the Indian service provider should be construed as export for the purpose of Export of Service Rules, 2005. Refund of cenvat credit allowed appeal allowed decided in favor of appellant.

Summary

Issues Involved:
- Rejection of refund application for unutilized Cenvat credit of service tax
- Determining the actual service recipient for the purpose of Export of Service Rules, 2005

Analysis:
1. The appeal challenged the rejection of a refund application for unutilized Cenvat credit of service tax, which was upheld by the Commissioner (Appeals-II) in an adjudication order.

2. The appellant, a subsidiary of British Airways PLC, provided call center services to British Airways (B.A.) by addressing calls from passengers and prospective passengers in India and abroad. The appellant filed a refund application for unutilized Cenvat credit as it exported output services without paying service tax, which was rejected based on the services not qualifying as export under the Export of Services Rules, 2005.

3. The appellant argued that B.A., located in the UK, was the actual service recipient based on contractual norms and payment received in convertible foreign exchange, meeting the conditions of Rule 3(2) of the Export of Services Rules, 2005. The appellant cited relevant tribunal judgments to support their position.

4. The Revenue contended that the major part of the service provided by the appellant was consumed in India, not meeting the condition of being "used outside India" as per Rule 3(2) of the Export of Service Rules, 2005.

5. The Tribunal considered the issue of determining the actual service recipient for the purpose of Rule 3(2) of the Export of Service Rules, 2005, focusing on whether B.A. in the UK or its customers in India and abroad qualified as the recipient.

6. The Tribunal noted that the appellant provided services to B.A. in the UK, with payment made in convertible foreign exchange, establishing B.A. as the recipient of service based on contractual obligations and payment for services rendered to B.A.'s customers.

7. Citing precedents, the Tribunal emphasized that the person paying for the service is the ultimate beneficiary, and services provided to a person outside India should be considered export under the Export of Service Rules, 2005.

8. Based on established principles, the Tribunal concluded that B.A. in the UK should be considered the service recipient, qualifying the services provided by the appellant as export under the Export of Service Rules, 2005, exempt from service tax. Consequently, the appeal was allowed in favor of the appellant, granting the refund claim of accumulated Cenvat credit on input services.