2017 (10) TMI 1230 - AT - Service Tax

Refund of CENVAT credit - Online Information and Data Access or retrieval Services provided by appellant - denial of refund on the ground that the services were provided in India and there was no export of the services - Held that - identical issue has come up before the Tribunal in the case of GAP International Sourcing (India) Pvt. Ltd. Vs. CST, Delhi 2014 (3) TMI 696 - CESTAT NEW DELHI wherein it was observed that The performance of such service in India, would not make them received/consumed in India, if beneficiary user/recipient of said service provided in relation to business or commerce, who has paid for these service and has used the service in his business, is located abroad. The position would be different if the company located abroad who has paid for the service, also has some branch/ project in India and the service provided in India is meant for that branch/project only in that case, the consumption of service would be in India and the service would be taxable in India. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal denying cenvat credit and refund for taxable services provided; Interpretation of service recipient in the context of service provision; Application of Export of Services Rules, 2005 to services provided in India for business outside India.

Analysis:
The appeal challenged Order-in-Appeal No.9 & 10/2013 dated 17.1.2013 concerning the denial of cenvat credit and refund for taxable services provided from 2009 to 2011. The appellant, engaged in "Online Information and Data Access or retrieval Services," claimed cenvat credit and refund, which was rejected by the department citing that the services were not exported as they were provided in India. The core issue revolved around the definition of a service recipient in the context of service provision.

During the proceedings, both parties were heard, and reference was made to a previous Tribunal case involving GAP International Sourcing (India) Pvt. Ltd. Vs. CST, Delhi. The Tribunal's observation in the mentioned case highlighted the criteria for determining the service recipient in a service transaction. It emphasized that the service recipient is the person on whose instructions the service is provided and who is obligated to make payment for it, whose need is satisfied by the service. The judgment clarified that for services related to business or commerce provided in India but used outside India, the services would be considered received outside India and hence exported if certain conditions were met.

The Tribunal, in alignment with the precedent set in the GAP International case, set aside the impugned order and allowed the appeals filed by the appellants. The decision was based on the interpretation of the Export of Services Rules, 2005, and the understanding that services performed in India but used for business outside India should be treated as exported. The judgment emphasized that services not consumed in India cannot be taxed in India, reinforcing the principle of taxation based on consumption location.

In conclusion, the Tribunal's decision in this case clarified the criteria for determining the service recipient in service transactions and underscored the importance of aligning with the Export of Services Rules, 2005, especially concerning services provided in India for business outside India. The judgment provided clarity on the taxation of services based on consumption location, ensuring adherence to legal provisions and established principles.