2019 (3) TMI 617 - AT - Service Tax

Levy of service tax - export of services or not - International Inbound Roaming Services provided by VCL to Foreign Telecommunication Operator Companies (FTOs), for which consideration is paid by the FTOs to the appellant in convertible foreign exchange - POPOS Rules - Held that - The department has proceeded with the view that the actual beneficiary of the service is the inbound roamers and the appellant being a service provider for such international roaming facility, the service would fall within the levy of service tax. In fact, even though the actual beneficiary of the service is inbound roamer, there is no agreement by the appellant to provide service to the actual inbound roamer. The agreement to provide service is between the appellant and the foreign telecommunication company. Thus, for the appellant, the service recipient can only be the foreign telecommunication company and not the international inbound roamer. Since the service recipient is located outside India, as per Rule 3(iii) of Export of Service Rules, the said services would amount to export of service for the period prior to 1.7.2012. For the period after 1.7.2012, the Place of Provision of Services Rules, 2012 came to be introduced and as per Rule 3 of such Rules, the location of the service recipient has to be taken into account for deciding as to where the services have been provided. So for the entire period of dispute, since the service recipient is outside India, the same amounts to export of services. It is clear from the order of Revisionary authority that when the appellant had paid service tax and filed refund claims on the very same services, the department has granted refund holding the services as export of services. The department has granted refund upto the period 31.3.2011. The department therefore cannot contend that the services are not export of services for the period from 1.4.2011 to 30.6.2012 and 1.10.2013 to 30.9.2014 which is the disputed periods in these appeals. The services are not exigible to service tax being export of service - Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Liability of service tax on international inbound roaming services.
2. Identification of the service recipient for international inbound roaming services.
3. Applicability of Export of Service Rules, 2005 and Place of Provision of Services Rules, 2012.
4. Relevance of previous Tribunal decisions and circulars.
5. Legitimacy of interest and penalty imposition.

Detailed Analysis:

1. Liability of Service Tax on International Inbound Roaming Services:
The primary issue is whether the appellants are liable to pay service tax on the international inbound roaming services provided to subscribers of foreign telecom companies visiting India. The department's view was that these services fall under the taxable category of "Telecommunication Service," and thus, service tax is applicable.

2. Identification of the Service Recipient:
The Tribunal examined whether the service recipient is the foreign telecom operator (FTO) or the international inbound roamer (subscriber). It was concluded that the service recipient is the FTO, as the agreement to provide services is between the appellant and the FTO, not the inbound roamer. The inbound roamer benefits from the arrangement but is not the direct service recipient.

3. Applicability of Export of Service Rules, 2005 and Place of Provision of Services Rules, 2012:
For the period prior to 01.07.2012, under Rule 3(iii) of the Export of Service Rules, services provided to FTOs are considered export if the service recipient is located outside India. Post 01.07.2012, Rule 3 of the Place of Provision of Services Rules, 2012, states that the location of the service recipient determines the place of service provision. Since the FTO is located outside India, the services qualify as export for both periods.

4. Relevance of Previous Tribunal Decisions and Circulars:
The appellant cited several Tribunal decisions, including Vodafone Essar Cellular Limited vs. CCE, Pune, where it was held that such transactions qualify as export of services. The department argued based on Notification No. 36/2007 and Circular No. 90/1/2007-ST, which suggested taxability. However, the Tribunal emphasized that the Master Circular dated 23.08.2007 supersedes all previous circulars, including Circular No. 90/1/2007-ST, thus supporting the appellant's position.

The Tribunal also noted the decision in Verizon Communication India Pvt. Ltd. vs. Assistant Commissioner, Service Tax, which reinforced that the Master Circular supersedes earlier circulars, including those that suggested these services are taxable.

5. Legitimacy of Interest and Penalty Imposition:
Given that the services were deemed export and not taxable, the Tribunal found that the imposition of interest and penalties was not tenable. The appellant's earlier refund claims for service tax paid on these services were granted, reinforcing the position that these services are export and not subject to tax.

Conclusion:
The Tribunal concluded that the services provided by the appellant are not liable to service tax as they qualify as export of services. The impugned orders demanding service tax, interest, and penalties were set aside, and the appeals were allowed with consequential relief as per law.

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