2018 (6) TMI 1002 - AT - Service Tax

Refund of Service Tax paid - since services were exported, appellant were not required to pay service tax and hence filed refund claim of service tax - refund rejected on the ground that there is no export of service - Held that - As per the provision for export of service under Rule 3(2)(a) of export of service Rule 2005, the only requirement to qualify services as export of service was the payment of such service is received by the service provider in convertible foreign exchange. Though the report/information on various aspect was prepared in India but the same was provided to GSKTS, Ireland and same was used by GSKTS in Ireland, therefore merely because the information/report were prepared in India it cannot be said that service has not been exported - It has been held in the case of M/S MOUNT KELLETT MANAGEMENT (I) PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-I 2015 (8) TMI 685 - CESTAT MUMBAI , that even though the service was performed in India but service recipient is located outside India and convertible foreign exchange was received towards such service, service shall be considered as export of service. Since lower authority have not verified documents properly i.e. debit note and entry of the debit note in the books of accounts, payment received against such debit note. If these informations are recorded in the books of accounts, which have been audited then only on basis of that debit note issued refund cannot be disputed - matter remanded to the adjudicating authority to verify all the facts and thereafter to pass a fresh order - appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant's service qualifies as an export of service for a refund claim.
2. Validity of the documents presented by the appellant for export of service.
3. Interpretation of statutory provisions for export of service.
4. Verification of documents and payment received in convertible foreign exchange.

Analysis:

1. The appellant provided business support services to a foreign entity in Ireland and paid service tax on it. Later, realizing the services were exported, they filed a refund claim. The lower authorities rejected the claim stating the services were not exported as they were provided in India. The appellant argued that the services were used by the foreign entity outside India and payment was made in convertible foreign currency, meeting the export criteria. The Tribunal noted that if services are performed in India but the recipient is outside India and payment is in foreign exchange, it qualifies as an export of service. The case was remanded for further verification.

2. The Commissioner contended that the absence of an agreement and the use of a debit note instead of an invoice invalidated the export claim. However, the Tribunal held that a debit note is an acceptable legal document for payment towards services, and the absence of an agreement does not negate the export of service if it is otherwise established. The Tribunal emphasized that the focus should be on payment in foreign exchange and the actual provision of services to the foreign entity.

3. The Tribunal clarified that under Rule 3(2)(a) of the export of service Rule 2005, the key requirement for qualifying as an export of service is the receipt of payment in convertible foreign exchange. The Commissioner's imposition of extraneous requirements not mandated by the statute was deemed irrelevant. The Tribunal emphasized that the location of service provision is not determinative if the service recipient is abroad and payment is in foreign currency.

4. The Tribunal found discrepancies in the lower authority's verification of documents and payment receipts. It emphasized the need for proper scrutiny of the debit note, its entry in the accounts, and the realization of payment in foreign exchange. Only after thorough verification of these aspects can a determination be made regarding the export of service and the eligibility for a refund. The case was remanded for a fresh order based on proper verification.

In conclusion, the Tribunal allowed the appeal by remanding the case to the adjudicating authority for a detailed examination of the facts to ascertain the export of service and the eligibility for a refund based on the statutory provisions and documentary evidence provided by the appellant.