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2017 (7) TMI 62 - AT - Service TaxExport of service - 100% EOU - Penalty - Held that - the appellant is not a subcontractor, but a co-venture along with JBL in executing the research and development assignments for clients like Eli Lilly and Company Ltd, USA situated outside India. We are further satisfied that the appellant have exported their services under the agreements, and also received payments in convertible foreign exchange through the EEFC account operated by JBL, as the lead venture - We also take notice of the certificate of chartered accountants, annexed in the paper book, which was also before the court below, which certifies that during the period in question, the affairs of the appellant have been verified and examined the payments made by Jubilant Biosys Limited to Jubilant Chemsys Ltd for its share of activities under the work orders received from the parties located outside India - the appellant have satisfied both the conditions for export of service, namely rendering of service from India and receipt of the service by the client outside India of consideration in convertible foreign currency in India - Decided in favor of the assessee.
Issues Involved:
1. Whether the assessee exported their services and received convertible foreign exchange as per Export of Service Rules. 2. Whether the services provided by the assessee to Jubilant Biosys Ltd. (JBL) were liable to service tax. 3. Whether the invocation of the extended period of limitation was justified. 4. Whether the assessee was a subcontractor or a co-venture with JBL. 5. Whether the revenue's appeal against allowing cum duty benefit and reduction in penalty was sustainable. Issue-wise Detailed Analysis: 1. Export of Services and Receipt of Convertible Foreign Exchange: The core issue was whether Jubilant Chemsys Ltd. (JCL) exported their services and received convertible foreign exchange as required under the Export of Service Rules. The assessee argued that they provided research and development services to clients outside India, such as Eli Lilly and Company, through a lead venture, JBL, and received payments in convertible foreign exchange through an EEFC account operated by JBL. The tribunal concluded that the assessee satisfied both conditions for export of service: rendering services from India and receiving payment in convertible foreign exchange. 2. Liability of Services to Service Tax: The Revenue contended that JCL provided services to JBL and not directly to foreign clients, thus not qualifying for export benefits. They argued that JCL acted as a subcontractor for JBL. However, the tribunal found that JCL was not a subcontractor but a co-venture with JBL, executing research assignments for foreign clients. The tribunal held that the services provided by JCL were indeed exported, and hence, not liable to service tax. 3. Invocation of Extended Period of Limitation: The Revenue invoked the extended period of limitation, alleging suppression of facts by JCL. The tribunal noted that the facts were derived from the appellant's records and statutory returns, which indicated no intentional suppression or misrepresentation. Consequently, the tribunal found the invocation of the extended period of limitation unjustified. 4. Subcontractor vs. Co-venture: The tribunal examined the agreements and found that JCL, JBL, and Jubilant Organosys Ltd. were co-ventures, not subcontractors. The agreements indicated that JBL acted as the lead venture, managing the EEFC account and representing the co-ventures. The tribunal concluded that JCL was a co-venture, providing services directly to foreign clients through JBL. 5. Revenue's Appeal on Cum Duty Benefit and Penalty Reduction: The Revenue appealed against the Commissioner (Appeals) allowing cum duty benefit and reducing penalties. Given the tribunal's findings that JCL exported services and received payments in convertible foreign exchange, the grounds of the Revenue's appeal were deemed unsustainable. The tribunal dismissed the Revenue's appeal and upheld the cum duty benefit and penalty reduction. Conclusion: The tribunal allowed the appeals by the assessee, set aside the impugned order, and concluded that JCL exported their services and received convertible foreign exchange, thereby satisfying the conditions under the Export of Service Rules. The tribunal also dismissed the Revenue's appeal, affirming the cum duty benefit and penalty reduction.
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