2022 (4) TMI 137 - AT - Service Tax

Refund of service tax - export of service or not - place of provision of services (POPOS Rules) - contention of the Department is that the services provided by the assessee-appellant in the form of supplying testing data in the electronic form does not amount to export of service in terms of Rule 3 of Place of Provision of Service, 2012 - suppression of facts or not - extended period of limitation - HELD THAT - The appellant-assessee M/s. MedGenome Labs Limited is a service provider and the MedGenome Inc., USA is the service recipient. The foreign client approaches the appellant for analysis and for identification of genetic patterns and linkages of the specific diseases or ailments based on scientific data, report generated in respect of such diseases/ailments. Report is delivered to foreign client in electronic or web delivery. The report is used by the clients for publishing research articles or manufacture of drugs or formulation after conducting further research and development. As per this fact, the service which is provided by the appellant to their foreign client is analysis report of the samples and not any goods. The collection of samples, analysis thereon is conducted by the appellant in India. It is undisputed fact that the appellant are not receiving any goods from their foreign client but conducting the tests. As per Rule 3 of POPS Rules, the place of provision of service shall be the location of the recipient of service. In the present case, the location of the recipient of service is in abroad. Therefore, the service deemed to have been provided in abroad at the place of service recipient - In the present case, it is beyond any doubt that the service recipient has not physically made available any goods to the appellant being a service provider. The service recipient has no connection in any manner with regard to the collection of samples. It is the appellant who on their own procured the samples from the hospitals and conduct the analytical tests. The appellant have only providing the test reports in electronic or web form to the recipient of service i.e. their foreign client. Therefore, the specific condition under Rule 4 that the service should be provided in respect of goods which must be physically provided by the recipient of service to the provider is not satisfied. The place of provision of service is clearly the location of the recipient of service, which in the present case is country of appellant s clients. Applying Rule 6A of Service Tax Rules, in the fact of the present case, the provider of service i.e. the appellant is located in India which is the taxable territory, recipient of service i.e. client of the appellant is located outside India. The service is not specified in Section 66 of the Finance Act. As per the discussion made hereinabove, the place of provision of service is clearly outside India. There is no dispute that the payment of such services has been received by the appellant as a service provider in convertible foreign exchange - the appellant have clearly satisfied the conditions required for treating the service as export of service. Therefore, the appellant s service, being export of service, cannot be chargeable to service tax. Appeal allowed - decided in favor of assessee.

Issues Involved:

1. Whether the service provided by the assessee qualifies as export of service.
2. Whether the services provided are in respect of goods as per Rule 4 of the Place of Provision of Service Rules, 2012.
3. Whether the extended period of limitation and penalty are applicable.
4. Calculation of service tax with reference to cum-tax benefit.

Detailed Analysis:

1. Whether the service provided by the assessee qualifies as export of service:

The assessee is engaged in providing clinical genomic solutions and delivers reports to clients in electronic form. The reports are used by clients for research, drug manufacture, or publication outside India, and payment is received in foreign exchange. The Department contended that these services do not qualify as export of service under Rule 3 of the Place of Provision of Service Rules, 2012 (POPS Rules). However, the Tribunal found that the services provided by the assessee fulfill all conditions under Rule 6A of the Service Tax Rules, 1994, thus qualifying as export of service. The Tribunal emphasized that the location of the service recipient is abroad, making the place of provision of service outside India.

2. Whether the services provided are in respect of goods as per Rule 4 of the Place of Provision of Service Rules, 2012:

The Department argued that the services are provided in respect of goods (samples), thus falling under Rule 4(a) of the POPS Rules. However, the Tribunal concluded that the samples (blood and tissue) are not provided by the clients but procured by the assessee. The samples are not marketable or saleable, and thus do not qualify as goods. The Tribunal also noted that the services are not performed on goods made available by the recipient, hence Rule 4 does not apply. The services are deemed to be provided at the location of the recipient, which is outside India.

3. Whether the extended period of limitation and penalty are applicable:

The Tribunal observed that the Department was aware of the assessee’s export claims since the beginning, as the assessee had filed service tax returns and refund claims disclosing export turnover. Given that the Department had previously granted refunds recognizing the services as export, the Tribunal ruled that the extended period of limitation and imposition of 100% penalty were not sustainable.

4. Calculation of service tax with reference to cum-tax benefit:

The Department challenged the calculation of service tax with reference to cum-tax benefit. However, since the Tribunal concluded that the services qualify as export and are not taxable, the issue of cum-tax benefit calculation became irrelevant. Consequently, the Tribunal did not delve into this issue further.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, concluding that the services qualify as export of service and are not chargeable to service tax. The appeal filed by the Revenue challenging the cum-tax benefit calculation was dismissed. The judgment emphasized the clear interpretation of statutory provisions and the factual matrix of the case, leading to the conclusion that the services provided by the assessee are indeed export of services.

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