2019 (3) TMI 44 - AT - Service Tax

Refund of unutilized CENVAT Credit - input services - Banking and Other Financial Services - Business Support Services - export of services - Held that - The entire share holdings of the appellant company were held by Ms. Ritu Singhal and Shri Rajiv Singhal. There is no specific mention about the overseas recipient of service M/s. Banyantree Capital Advisors Limited, Mauritius. Further, no evidences were produced by the department to show that the appellant was the subsidiary company of the overseas service receiver. Thus, the denial of refund benefit on the ground that appellant is subsidiary of the service receiver will stand for judicial scrutiny. With regard to provision of service, it is an undisputed fact that appellant had entered into an agreement with the overseas service receiver and pursuant to such agreement, had provided the service on payment of consideration in the form of advisory fee . After receiving the taxable service by the overseas entity, the place of actual use of service will not be considered as the relevant factor for export inasmuch as the appellant was not a party to the service used within India and there is no specific agreements executed between the appellant and the Indian recipient of service - Since the appellant is no way connected to the user of service in India, it cannot be said that the services provided to overseas entity cannot be considered as export in terms of Export of Service Rule, 2005. There is no merits in the impugned order passed by the Learned Commissioner (Appeals) - appeal allowed - decided in favor of appellant.

Summary

Issues:
Refund of service tax paid on input services for exported services; Relationship between service provider and recipient; Classification of services as export under the Export of Service Rules, 2005.

Analysis:
The appellant, engaged in providing taxable services, filed a refund application for service tax paid on input services used for providing exported services to a company in Mauritius. The refund was rejected based on the relationship between the companies and the nature of services provided. The appellant argued that there was no holding/subsidiary relationship and that the services qualified as exports. The Revenue contended that since the services were used in India, they did not qualify as exports under the Cenvat Credit Rules, 2004.

The Tribunal examined the shareholding pattern of the appellant and found no evidence to support the claim of being a subsidiary of the overseas service receiver. It concluded that denial of the refund on this ground was not justified. Regarding the provision of services, the Tribunal noted that the appellant had a direct agreement with the overseas entity and that the services were consumed in India by the Indian recipient, not by the appellant. It held that the services provided to the overseas entity could be considered exports under the Export of Service Rule, 2005, as the appellant was not connected to the use of services in India.

The Tribunal referred to its earlier order in the case of the appellant and cited precedents involving similar situations to support its decision. It found no merit in the Commissioner's order and allowed the appeal in favor of the appellant, granting consequential benefits as per the law. The impugned order was set aside, and the appeal was allowed, emphasizing the distinction between the service provider and the recipient, and the classification of services as exports based on the relevant rules and agreements.