2018 (9) TMI 666 - HC - Service Tax

Export of services or not? - Place of provision of service - business of promoting/ selling medical equipments and also rendering after sales services like installation commissioning etc. in India to a foreign party - liability of Service Tax - services are consumed in India and not at place outside India - Whether on the facts and circumstances of the case and in law was the Tribunal justified in holding that the services provided by the Respondent herein qualify as export of service under the provisions of Export of Services Rules 2005? Held that - This Court in SGS India Pvt. Ltd. 2014 (5) TMI 105 - BOMBAY HIGH COURT has held that where services were rendered in India to a foreign party then such service is not liable to tax as it would be export of service - the Central Board of Excise & Customs has issued a clarification by Circular No.111/2009 dated 24th February 2009 that in terms of Rule 3(1)(iii) of Export of Service Rules 2005 it is not the place of performance but the location of the service receiver which will make it an export of services. It clarified that word outside India to mean that the benefit should accrue outside India. The aforesaid Circular of CBDT is completely in favour of the Respondent. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the services provided by the Respondent qualify as export of service under the Export of Services Rules, 2005?
2. Whether the Respondent is liable to pay service tax when the services are consumed in India and not at a place outside India?

Analysis:
1. The Respondent, engaged in promoting/selling medical equipment and providing after-sales services in India to a foreign party, was challenged by the Revenue for not paying service tax on services rendered in India. The Tribunal's order favored the Respondent, citing the Export of Service Rules, 2005, and a previous court decision. The Revenue argued that as services were performed in India, the Respondent should pay service tax under Reverse Charge Mechanism. However, the Court upheld the Tribunal's decision, referencing the decision in Commissioner of Sales Tax v/s. SGS India Pvt. Ltd., 34 STR 554, and ruled in favor of the Respondent.

2. The Revenue contended that the decision in SGS India Pvt. Ltd. was not applicable to the current case, as services were entirely provided in India. The Court, citing previous judgments, clarified that services rendered in India to a foreign party are considered export of service and not liable to tax. The Court also referred to Circular No.111/2009 by the Central Board of Excise & Customs, emphasizing that the location of the service receiver determines if it qualifies as an export of service. As the benefit accrued outside India, the services were deemed export services. Consequently, the Court dismissed the Revenue's arguments, stating that the proposed questions did not raise substantial legal issues, leading to the dismissal of the Appeal.

In conclusion, the High Court of Bombay upheld the Tribunal's decision, ruling in favor of the Respondent and dismissing the Appeal, as the services provided were considered export services under the Export of Services Rules, 2005, and were not liable for service tax when consumed in India but benefiting a party outside India.