2017 (4) TMI 96 - AT - Service Tax

Refund claim - unutilised CENVAT credit - N/N. 5/2006-CE (NT) dated 14/03/2006 - rejection on the ground that the appellants provided market research agency service in terms of Section 65 (105) (y) and not BAS, as claimed by them - further, rejection also on the ground that the services are rendered in India and they cannot be considered as exported in terms of Export of Services Rules, 2005 - Held that - the work carried out by the appellant will fall under the category of market research agency. The claim of the appellant that they are engaged in procuring services for the foreign client and, as such, should be considered as rendering BAS is not factually or legally sustainable. The appellants are only collecting data by questionnaire and study. Collection of such data from various target persons cannot be considered as procurement of services which are inputs for the clients - classification of the service under market research agency is correct - refund rightly rejected. On the second issue regarding the claim of export of service by the appellant, we note that the data collected by the appellants are delivered to the clients outside India in the required format. Without such delivery of the collected data the service will not get completed - In the present case, we are dealing with market research agency service. The same ratio is applicable. The data collected from target groups are to be arranged and delivered in a manner as required by the foreign client. Without such delivery of the collected data there is no completion of service. Hence, that part of the service is performed outside India. In such situation, the proviso clause of Rule 3 (1) of the Export of Services Rules, 2005 will apply. The said proviso stipulates that where such taxable service is partly performed outside India, it will be treated as performed outside India - The claim shall be considered, upon verification of supporting documents and fulfillment of other conditions, as mentioned in the notification issued under the said rule - matter on remand. Appeal rejected in part and part matter on remand.

Summary

Issues:
Eligibility of appellant for refund of Cenvat credit under Notification 5/2006-CE (NT) dated 14/03/2006 and classification of services rendered by the appellant as Business Auxiliary Service (BAS) or market research agency service.

Analysis:
The appeals were filed against orders rejecting refund claims for unutilized Cenvat credit. The appellant contended that their services fall under BAS as they collect data for foreign clients, making it an export of service. The Original Authority and Commissioner (Appeals) classified the services as market research agency services rendered in India.

The appellant argued that their services involve project set up, data collection, and quality control for foreign clients, constituting an export of service as the recipient is located abroad. They claimed that service provision is completed upon data delivery to clients outside India, making it eligible for Cenvat credit refund.

The Revenue maintained that the appellant's activities align with market research services, emphasizing that data collection and quality check for foreign clients do not qualify as BAS. They contended that since the services are rendered in India, the appellant is not entitled to Cenvat credit refund.

Upon review, the Tribunal analyzed the scope of work outlined in the agreement between the appellant and foreign client. The agreement focused on conducting research among specific target groups for market trends, indicating a market research agency service. The Tribunal referenced the statutory definition of market research agency under Section 65 (105) (y) and concluded that the appellant's activities align with this classification.

Regarding the export of service claim, the Tribunal noted that data delivery to foreign clients outside India is crucial for service completion. Citing a precedent, the Tribunal determined that service performance extends beyond India, qualifying it as an exported service under Rule 3 (1) of the Export of Services Rules, 2005. Consequently, the Tribunal allowed the appeals, directing the Original Authority to verify supporting documents for Cenvat credit refund eligibility.

In conclusion, the Tribunal held that the appellant's services are classified as market research agency services and qualify as exported services, entitling them to a refund of input service credits under Rule 5 of Cenvat Credit Rules, 2004. The impugned orders were set aside, and the appeals were allowed for further examination and verification of refund claims.