2018 (1) TMI 1175 - AT - Service Tax

Refund of service tax - export of service - arrangement involved in the transfer of money from a customer located abroad to an Indian recipient - Held that - The tax liability of such services has been a subject matter of various decisions by the Tribunal. Dealing with one of the agents of the appellant engaged in transfer of money from abroad to a person in India, the Tribunal in the case of Wall Street Finance Ltd. 2014 (10) TMI 312 - CESTAT MUMBAI has held that At the relevant time, there were no specific rules to determine the place of provision of service in service tax law. However, with effect from 20/06/2012 a specific Rule has been prescribed called Place of Provision of Service Rules, 2012. Though these Rules are only prospective in nature, the provisions of these Rules can be gainfully used to understand the concept of place of provision. In the present case, the Department of Post is rendering service to the appellant by executing the remittance of foreign exchange to the intended recipient in India. For this, they are receiving the considerations from the appellant. The services are availed by the appellant, who is a foreign based entity. This is to be considered as export of service as held by the Tribunal in various cases. Unjust Enrichment - Held that - The Tribunal in Wienerberger Brick Industries Pvt. Ltd. 2014 (1) TMI 1151 - CESTAT BANGALORE held that with reference to refund claims relating to export of services the principle of unjust enrichment would not be applicable as provided in Section 11 B of the Central Excise Act, 1994. - unjust enrichment will not apply. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Rejection of refund of service tax claimed by the appellant for the export of services.
2. Determination of whether the services provided qualify as export of services.
3. Application of the doctrine of unjust enrichment.

Issue-wise Detailed Analysis:

1. Rejection of Refund of Service Tax:
The appellants, a company incorporated outside India, engaged in money transfer services, filed four appeals against the rejection of refund claims by the Commissioner (Appeals), Central Excise, Delhi-I. The refund claims pertained to service tax paid on money transfer services for the period from May 2006 to February 2009. The Original Authority rejected these claims, classifying the services under "Business Auxiliary Service" and asserting that the service tax was correctly discharged. The Commissioner (Appeals) upheld this rejection, affirming that the transactions were subject to service tax and did not qualify as export of service.

2. Determination of Export of Services:
The appellants contended that their services were exported, relying on previous Tribunal decisions such as Paul Merchants Limited and others, which held that similar services constituted export of service and were not taxable in India. The Tribunal examined the arrangement where the Department of Post acted as an agent for the appellant, transferring money to recipients in India based on instructions from abroad. The Tribunal referenced Rule 3 of the Export of Service Rules, 2006, which states that for "Business Auxiliary Service," the place of provision is determined by the location of the service recipient. Since the appellant, based outside India, was the recipient of the service, the Tribunal concluded that the services were indeed exported.

3. Doctrine of Unjust Enrichment:
The Commissioner (Appeals) had also rejected the refund claims based on the doctrine of unjust enrichment, despite this not being raised in the show cause notice. The Tribunal found no legal infirmity in the lower authorities considering statutory requirements before sanctioning refunds. However, the appellants argued that they had not passed on the service tax burden to any third party, supported by a Chartered Accountant's certification and uniform billing practices. The Tribunal accepted this argument, noting that the appellants' customers paid a uniform fee without any additional tax component attributable to service tax. Furthermore, the Tribunal cited previous decisions, such as Pulcra Chemicals (India) Pvt. Ltd. and others, which held that the doctrine of unjust enrichment does not apply to export of services.

Conclusion:
The Tribunal set aside the impugned orders, holding that the services in question were exported and thus not taxable in India. It also determined that the doctrine of unjust enrichment did not apply, allowing the appellants' refund claims with consequential relief as per law. The appeals were allowed, and the orders denying the refund claims were deemed unsustainable.