2017 (5) TMI 750 - AT - Service Tax

Refund claim - commission received in convertible foreign exchange - the appellant was the agent of Electro Motive Diesel (EMD) who obtained the orders from the Indian Railways - whether the activity carried on by appellant comes within the scope of export of the service u/r 3 of the Export Service Rules 2005 - Held that - in the assessee appellant s case NATIONAL ENGINEERING INDUSTRIES LTD. Versus COMMR. OF C. EX. JAIPUR 2011 (9) TMI 759 - CESTAT NEW DELHI such service was considered as the export of service u/r 3(ii)(i) (a) and 3(ii)(i) (b) of Export of Services Rules 2005 read with Section 65(105)((zzb) of the FA 1994 - the services are considered as export of services and refund allowed on same - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund claim denial for service tax paid on export of services under Rule 3 of Export Service Rules, 2005.

Analysis:
The judgment pertains to two appeals filed against the Order-in-Appeal denying the refund of service tax paid by the appellant during the disputed period of 5.6.2007 to 10.4.2008. The appellant, an agent of Electro Motive Diesel (EMD), received commission in convertible foreign exchange from its principal for obtaining orders from the Indian Railways. The appellant claimed the refund under Rule 3 of the Export Service Rules, 2005, which was denied by the department, leading to the present appeals.

Upon hearing both parties and examining the records, it was noted that a similar service was considered as the export of service in a previous case involving National Engineering Industries Ltd. The Tribunal had previously allowed a refund claim for service tax paid on export of services under Rules 3 and 4 of the Export Services Rules, 2005, in the appellant's own case. The Tribunal observed that the appellant wrongly paid service tax on the commission received and was entitled to a refund under the relevant rules.

The Annexure to the Purchase Order revealed that the appellant was to receive payment in convertible foreign exchange, but due to certain deductions by Indian Railways, the full amount was not released. The Tribunal held that for the appellant to avail the benefit of Rule 4, it must fulfill the conditions of Rule 3(2) of the said Rules, which require payment in convertible foreign exchange. The Tribunal interpreted the legislative intention to promote the object of the scheme, emphasizing that the appellant complied with the provisions despite the foreign exchange not being released in full.

In line with a previous decision, the impugned order was set aside, and the authorities were directed to consider the refund claim of the appellant in accordance with the law. Consequently, the appeals filed by the appellants were allowed, granting them relief in the matter of the refund claim for service tax paid on export of services.

This comprehensive analysis of the judgment showcases the key issues involved, the arguments presented by both parties, the legal interpretations made by the Tribunal, and the final decision rendered in favor of the appellant.