2018 (9) TMI 1519 - AT - Service Tax

Refund of service tax - export of services - Place of provision of service - main contention put forward by the department is that the appellant is an intermediary and therefore the place of provision of service is within India - input services - Held that - The appellants was engaged by M/s.H&H, China. So also, it is admitted that appellants have provided services to H & H, China. The invoices were raised on H & H, China by the appellant. The only conclusion therefore possible is that H & H, China is the intermediary if at all, and not the appellant - The recipient of logistic services being situated outside India, and the consideration having received in convertible foreign currency, the transaction has to be treated as export of service - thus appellant has facilitated the re-export of the goods. Input services - allegation is that major part of the input services were availed for import of goods and not export of services - Held that - The goods were to be carried back to China. For this re-export/return of goods, various legal formalities and procedures are required to be complied. The goods had to be kept in CFS, under proper storage facility had to be presented for examination/verification of Customs department etc. The inputs services availed for doing such return of goods to China are services availed for exports of goods only - appellant is eligible for refund of cenvat credit availed on input services used for export of logistic services. Refund allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Refund claim rejection for service tax paid on input services for export of logistics services.
2. Interpretation of Rule 9 of Place of Provision of Rules (POPR), 2012.
3. Eligibility for refund of cenvat credit on input services for export of logistic services.

Analysis:

Issue 1 - Refund Claim Rejection:
The appellants registered under service tax as Clearing & Forwarding Agents and for GTA services filed a refund claim for service tax paid on input services for export of logistics services. The claim was rejected by the original authority and upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal. The department argued that the activities of the appellant did not relate to the export of services. However, the appellant contended that they provided specific logistics services for the return of imported goods to a Chinese shipper, receiving consideration in foreign exchange. The Tribunal found that the appellant facilitated the re-export of goods, making the transaction an export of service, thus ruling in favor of the appellant and allowing the appeal with consequential benefits.

Issue 2 - Interpretation of Rule 9 of POPR, 2012:
The department relied on Rule 9 of Place of Provision of Rules 2012 to argue that the appellant, being an intermediary, provided services within India. However, the Tribunal noted that the appellant was engaged by a Chinese entity and provided services to them, making the Chinese entity the intermediary, not the appellant. As the recipient of the logistic services was outside India and consideration was received in foreign currency, the transaction was deemed an export of service. This interpretation led to the rejection of the department's argument and supported the appellant's claim for refund.

Issue 3 - Eligibility for Refund of Cenvat Credit:
A significant contention was raised regarding the input services availed by the appellant, with the department claiming that most services were for import, not export. The appellant clarified that the services were essential for the return/export of goods to China, as per the shipper's instructions. The Tribunal agreed with the appellant, stating that the services availed were indeed for the export of goods, as the goods were to be carried back to China due to unforeseen circumstances. Consequently, the rejection of the refund claim based on the alleged non-availment of services for export was overturned, and the appellant was deemed eligible for a refund of cenvat credit on input services used for export of logistic services.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant.