2019 (2) TMI 15 - AT - Service Tax

Refund of service tax paid - input services - export of service - POPOS Rules - Providing Business Support Service and Management or Business Consultants Service - Held that - The destination of provision of service is to be considered on the basis of the place of consumption and not on the basis of place of performance of service - the services provided by the respondent is to be categorized as service falling under Rule 3(1)(iii) of the Export of Service Rules, 2005. The issue arising out of the present dispute is no more res integra in view of the decision of this Tribunal in the case of Paul Merchants Ltd. v CCE, Chandigarh 2012 (12) TMI 424 - CESTAT, DELHI (LB) , wherein it has been held that the service receiver located abroad, since has paid for the services, the beneficiary of service in India cannot be termed as service receiver for the purpose of consideration of export, in terms of Rule 3 of the Export of Service Rules, 2005. Refund allowed - appeal filed by Revenue is dismissed.

Summary

Issues:
- Appeal against order passed by the Commissioner of CGST and Central Excise (Appeals-II), Mumbai regarding refund of service tax paid on input services for exportation of output services.
- Determination of whether the services provided can be considered as "export of service" under Export of Services Rules, 2005.
- Assessment of the nexus between input services and output services for granting refund benefits.

Analysis:
The case involved an appeal by Revenue against the order of the Commissioner of CGST and Central Excise (Appeals-II), Mumbai, rejecting a refund claim of service tax paid on input services for exporting output services. The respondent, engaged in business support and management consultancy services, sought a refund under Rule 5 of the Cenvat Credit Rules, 2004. The original authority denied the refund, stating that the services provided by the respondent did not qualify as "export of service" during the disputed period. The Commissioner (Appeals) reversed this decision, granting a refund of ?42,85,660 to the respondent, emphasizing that the services met the requirements of Rule 3 of the Export of Services Rules, 2005 for export classification. However, the benefit of Cenvat credit was still denied due to the lack of nexus between input and output services.

The learned Commissioner (Appeals) based the decision on the destination of service provision, considering the place of consumption over the place of service performance. The judgment referenced the case law of Paul Merchants Ltd. v CCE, Chandigarh, highlighting that payment by a service receiver located abroad establishes the export nature of the service, even if the beneficiary is in India. The Tribunal found no fault in the Commissioner's order, as it aligned with established legal principles. Consequently, the Revenue's appeal was dismissed, affirming the refund granted to the respondent for export services while upholding the denial of Cenvat credit due to the lack of nexus between input and output services.

This judgment clarifies the interpretation of export of services under the Export of Services Rules, 2005, emphasizing the significance of the destination of service provision and the payment source in determining export status. It underscores the importance of establishing a clear nexus between input and output services for claiming refund benefits under relevant tax rules. The decision provides guidance on the application of legal principles in service tax matters, ensuring consistency and adherence to established precedents in similar disputes.