2017 (11) TMI 659 - AT - Service Tax

Refund of unutilized CENVAT credit - export of services - providing SMS Aggregator services to facebook, Ireland - rejection on the ground that the services of BSS provided by the Respondent to M/s Facebook does not qualify as export of service - whether the Respondent are eligible to refund of accumulated cenvat of input services in terms of Rule 5 of Cenvat Credit Rules? - Held that - Under the terms of agreement we find that the Respondent is getting paid by the facebook based upon the number of SMS messages successfully transmitted through Respondent s network. It also provides the fees based upon the Billable Message Length , Unicode Message, Undelivered Message which would not be chargeable, Long Codes fees etc. It provides the fee structure based upon nature of message. In sum and substance the Respondent is rendering services to M/s Facebook and getting fees for services provided in each month. The subscribers are not even aware of the existence of the Respondent and their role in services provided by Facebook. The Respondent and the subscribers are not into contractual agreement. There is no consideration flowing to the Respondent from such subscribers. The Respondent is working under the directions/instructions and discretion of Facebook. The subscribers are dependent upon facebook for receipt/ delivery of their SMSs - The Tribunal in the case of M/s Paul Merchants Ltd. 2012 (12) TMI 424 - CESTAT, DELHI (LB) has held that Export of Services Rules, 2005 and Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 have been framed, following general principle that taxable service provided by a person in India will be subject to tax only when it has been consumed in India, and Service Tax must be levied in that taxable area where service has been consumed. Coming to the Rule 3 of the Place of Provision of Service Rules, 2012 and its application to the instant case, we find that the proviso to said Rule states that in case location of the service provider is not available in the ordinary course of business, the place of the provision shall be the location of the provider of Service. Further as per Rule 2 (i) of the said Rules the Location of Service Provider is the location of his business establishment. In the case in hand there is no dispute about the facts that the service recipient is Facebook which is located outside India and thus its location is available. Hence the Indian subscribers of Facebook cannot be termed as Service Recipient . In such case even the Rule 8 of POP would not apply as the service recipient i.e Facebook is situated in Ireland which is located outside India a non taxable territory. There is no dispute about the fact that the consideration of service was received from M/s Facebook in convertible Foreign Exchange therefore there is no doubt in our mind that the services of the respondent is clearly exported to Facebook, Ireland, hence the refund claim under Rule 5 of Cenvat Credit Rules, 2004 is admissible to the respondent. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Eligibility for refund of accumulated Cenvat credit of input services used for export of services.
2. Determination of whether the services provided qualify as export of services.
3. Application of Place of Provision of Services Rules (POP) and Rule 5 of Cenvat Credit Rules, 2004.
4. Relevance of precedents and legal interpretations in similar cases.

Detailed Analysis:

1. Eligibility for Refund of Accumulated Cenvat Credit:
The primary issue is whether the respondent is eligible for a refund of accumulated Cenvat credit of input services used in the export of services under Rule 5 of the Cenvat Credit Rules, 2004. The respondent, engaged in providing Business Support Services (BSS) to Facebook Ireland, claimed refunds for the periods January to December 2014. The Commissioner (Appeals) had allowed these claims, which the Revenue contested, arguing that the services were consumed in India and thus did not qualify as export services.

2. Determination of Export of Services:
The core of the dispute revolves around whether the services provided by the respondent qualify as export of services. The Revenue argued that since both the service provider (respondent) and the service recipient (Facebook subscribers in India) are located in India, the services do not constitute export. However, the respondent contended that their services were provided to Facebook Ireland, with payment received in convertible foreign currency. The tribunal found that the services were indeed provided to Facebook Ireland, and the respondent had no direct interaction with the Indian subscribers. The tribunal relied on the definition and criteria for export of services, emphasizing that the service recipient is the entity obliged to make payment, which in this case was Facebook Ireland.

3. Application of Place of Provision of Services Rules (POP) and Rule 5 of Cenvat Credit Rules, 2004:
The Revenue cited Rule 3 and Rule 8 of the POP Rules to argue that the place of provision of service is India. However, the tribunal noted that the proviso to Rule 3 applies only when the location of the service recipient is not available, which was not the case here as Facebook Ireland's location is well-known. Therefore, Rule 8, which applies when both service provider and recipient are in the same taxable territory, was deemed inapplicable. The tribunal upheld that the services were exported as per Rule 6A of the Service Tax Rules, making the respondent eligible for a refund under Rule 5 of the Cenvat Credit Rules.

4. Relevance of Precedents and Legal Interpretations:
The tribunal considered precedents like the Paul Merchants Ltd. and Vodafone Essar Cellular Ltd. cases, which supported the respondent's position. These cases established that services provided to entities outside India, where payment is received in foreign currency, qualify as export of services. The tribunal also referenced CBEC's education guide and trade notices, which clarified that the service recipient is the entity making the payment, not the end-users in India. The tribunal dismissed the Revenue's reliance on pending appeals against these precedents, affirming that the adjudicating authority must follow existing tribunal decisions.

Conclusion:
The tribunal concluded that the services provided by the respondent to Facebook Ireland qualify as export of services, making them eligible for a refund of accumulated Cenvat credit of input services. The appeals filed by the Revenue were dismissed, and the orders of the Commissioner (Appeals) were upheld, confirming the respondent's entitlement to the refund.