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2019 (10) TMI 327 - AT - Service TaxRefund of service tax - rejection of refund on the ground that the services provided by the appellants do not qualify as export of services - whether the services rendered by the appellant to AMSI France will qualify as Export of Services in terms of Export of Service Rules, 2005 as amended from time to time? - Rule 3 of Export of Service Rules, 2005 - Difference of opinion. HELD THAT - There are contrary views expressed by the coordinate benches of tribunal, judicial propriety demands that matter should be referred to Hon ble President for constituting a larger Bench to resolve the issues. The matter referred to Hon ble President to constitute a larger bench to determine the extant and scope of phrase such taxable services which are provided and used in or in relation to commerce or industry and the recipient of such services is located outside India used in Rule 3(3)(i) of Export of Services Rules, 2005 upto 18.04.2006, extant and scope of phrase such service is delivered outside India and used outside India used in Rule 3(2)(a) of Export of Services Rules, 2005 from 19.04.2006 to 28.02.2007, extant and scope of phrase services provided from India and used outside India used in Rule 3(2)(a) of Export of Services Rules, 2005 from 01.03.2007 onwards and also Whether the services rendered to foreign entity located outside India for development of its business in India will qualify as Export of Service in terms of the above phrases used in the Export of Services Rules, 2005 from time to time and the decision of Apex Court in case of GVK INDUSTRIES LTD. ANOTHER VERSUS THE INCOME TAX OFFICER ANOTHER 2015 (2) TMI 730 - SUPREME COURT ?
Issues Involved:
1. Classification of services provided by the appellant. 2. Whether the services rendered qualify as export of services under the Export of Service Rules, 2005. 3. Scope of the phrases "provided and used in or in relation to commerce or industry and the recipient of such services is located outside India," "delivered outside India and used outside India," and "provided from India and used outside India." 4. Applicability of the decision in GVK Industries Ltd. vs. Income Tax Officer to the case. 5. Entitlement to refund of service tax paid. Issue-wise Detailed Analysis: 1. Classification of Services Provided by the Appellant: The tribunal confirmed that there was no dispute about the classification of services provided by the appellant to AMSI France. Both parties agreed that the appellant acted as a commission agent for AMSI France, procuring orders for the sale of goods in India. Thus, the services provided were classifiable as "Business Auxiliary Service" under Section 65(19) of The Finance Act, 1994. 2. Whether the Services Rendered Qualify as Export of Services: The appellant argued that the services provided should qualify as export of services because they were provided to a recipient located outside India, and payments were received in convertible foreign exchange. They relied on the Export of Service Rules, 2005, and various case laws to support their claim. However, the revenue contended that the services were used for the development of AMSI France's business in India, and thus, could not be considered as export of services. 3. Scope of Phrases in Export of Service Rules, 2005: The tribunal examined the phrases "provided and used in or in relation to commerce or industry and the recipient of such services is located outside India," "delivered outside India and used outside India," and "provided from India and used outside India" as they appeared in the Export of Service Rules, 2005, and their amendments. The tribunal noted that the services provided by the appellant were consumed in India for the business activities of AMSI France, hence failing to meet the criteria for export of services. 4. Applicability of GVK Industries Ltd. vs. Income Tax Officer: The tribunal referred to the Supreme Court's decision in GVK Industries Ltd. vs. Income Tax Officer, which held that income earned by a foreign entity in respect of business activities in India could be subjected to tax in India. The tribunal applied this principle, concluding that the services provided by the appellant were used for developing AMSI France's business in India, thus not qualifying as export of services. 5. Entitlement to Refund of Service Tax Paid: The tribunal considered the appellant's claim for a refund of service tax paid on the grounds that the services qualified as export of services. However, since the tribunal determined that the services were consumed in India, the appellant was not entitled to the refund. The tribunal also noted that judicial propriety required referring the matter to a larger bench due to conflicting views in previous tribunal decisions. Conclusion: The tribunal concluded that the services provided by the appellant to AMSI France were used for business activities in India and did not qualify as export of services under the Export of Service Rules, 2005. Consequently, the appellant was not entitled to a refund of the service tax paid. The matter was referred to a larger bench to resolve the legal questions regarding the scope of the phrases used in the Export of Service Rules, 2005.
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