2023 (4) TMI 714 - AT - Service Tax

Levy of Service Tax - clearing and forwarding services for the goods manufactured and exported - service tax paid for the period up to June 2008 - non-payment of service tax from July 2008, for the reason of exclusion in terms of Rule 3 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - HELD THAT - The services have been wholly performed outside India, which the Revenue wants to tax since the sale proceeds were being collected in India. It is in this context that Rule 3(ii) of the Rules ibid which is framed, comes to the rescue of an exporter who would earn in foreign exchange. The very same issue has been decided by this very Bench in the appellant s own case M/S. SUNDARAM INDUSTRIES LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, MADURAI COMMISSIONERATE 2018 (12) TMI 947 - CESTAT CHENNAI that There is no dispute that the service is provided outside the territory of India, but the Revenue wants to tax the assessee since it collects sale proceeds in India. But the legislature in its wisdom, has framed Rule 3(ii) to encourage exports and in turn foreign exchange remittances. We find force in the contention of the Ld. Advocate that the activity of the appellant being wholly performed outside India, is excluded from service tax liability as per Rule 3(ii) of the Taxation of Services (provided from outside India and received in India) Rules, 2006. The demand, as confirmed in the impugned Order-in-Appeal, cannot sustain, for which reason the same is set aside - Appeal allowed.

Summary

Issues involved:
The issue involves the demand raised on the appellant for the period from July 2008 onwards under the category of clearing and forwarding agency services.

Summary:

Issue 1: Demand raised on the appellant for the period from July 2008 onwards under the category of clearing and forwarding agency services

The appellant was paying Service Tax on clearing and forwarding services for goods manufactured and exported until June 2008. However, they stopped paying Service Tax from July 2008 based on the exclusion in Rule 3 of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. A Show Cause Notice was issued in 2011, leading to Order-in-Original No. 136/2012 confirming the demands. The appellant appealed to the First Appellate Authority, which also upheld the demands, prompting the current appeal.

Issue 1 Details:
The appellant argued that previous orders from the same Bench of CESTAT had settled the issue in their favor, citing specific cases. The Revenue, represented by the Deputy Commissioner, relied on lower authorities' findings. The main contention was whether the demand for clearing and forwarding agency services from July 2008 onwards was justifiable.

Upon hearing both sides and reviewing previous orders, the Tribunal found that the services were performed entirely outside India, even though the sale proceeds were collected in India. Rule 3(ii) of the Taxation of Services Rules was highlighted, which aims to encourage exports and foreign exchange remittances. The Tribunal agreed with the appellant's advocate that the activity falls outside the service tax liability as per Rule 3(ii). Citing previous judgments and the legislative intent, the Tribunal concluded that the impugned order was unsustainable and set it aside, allowing the appeal with consequential benefits.

In conclusion, the demand confirmed in the impugned Order-in-Appeal was deemed unsustainable, leading to its setting aside and allowing the appeal with any consequential benefits as per the law.