2017 (4) TMI 1178 - AT - Service Tax

Refund claim - unutilised CENVAT credit - export of output services without payment of service tax - Held that - as the services provided by the respondents fall under Export of service, the services provided by the respondent are not liable to be taxed - the respondents are entitled for refund claims - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Refund claims of the respondents allowed by Ld. Commissioner (Appeals) following Tribunal's order.
2. Determination of actual service recipient for the purpose of Export of Service Rules, 2005.
3. Eligibility of refund claims for unutilized Cenvat credit on input services due to export of output services.

Analysis:
1. The case involved an appeal by Revenue against the Ld. Commissioner (Appeals) orders allowing refund claims of the respondents based on Tribunal's previous decision. The appellant, a subsidiary of British Airways PLC, provided call center services to British Airways (B.A.) on a cost-plus mark-up basis. The services were considered taxable under Business Auxiliary Service. The appellant exported output services without paying service tax and filed refund applications for unutilized Cenvat credit. The Ld. Commissioner (Appeals) allowed the refund claims, which Revenue contested.

2. The key issue was determining the actual service recipient for the purpose of Export of Service Rules, 2005. The Tribunal analyzed whether B.A. located in the UK or its customers in India and abroad were the recipients of the service. The Tribunal emphasized that payment in convertible foreign exchange to the service provider is crucial for considering a service as export. It was established that B.A. should be regarded as the recipient of service based on contractual obligations and payment terms. Precedents like Paul Merchants and Microsoft Corporation cases supported the view that the ultimate beneficiary of service, paying for the service, should be considered the recipient for export purposes.

3. The Tribunal upheld that the services provided by the respondents qualified as export of service, as established in previous rulings. Referring to the Paul Merchants case, it was concluded that the services provided were not liable to be taxed. Therefore, the respondents were entitled to refund claims for accumulated Cenvat credit on input services due to the export of output services. The Tribunal dismissed the appeals filed by Revenue, affirming the decision to uphold the refund claims for the respondents.