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2024 (5) TMI 832 - AT - Service TaxNon-payment of service - Liability of service tax on ship crew recruitment services - export of service - intermediary services - place of provision rules - fees received for services rendered to ESM situated in Singapore, where payment is received in foreign currency - Rule 2(f) and Rule 9(c) of the Place of Provision of Service Rules, 2012 - extended period of limitation - HELD THAT - The definition of taxable services under the category of Ship Management Service defined under Section 65(96a) ibid included various activities including engagement or providing of ship crew. Further, such ship management service was covered specifically under the taxable clause (zzzt) of Section 65(105) ibid. Thus, it clearly flows from the above legal provision that the service of ship crew recruitment provided by the appellants to any person in the taxable territory are subjected to levy of service tax. Inasmuch as the Chapter V of the Finance Act, 1994 extends to the whole of India except the State of Jammu and Kashmir, it transpires as a corollary that services provided outside India are not liable for payment of service tax - the activities undertaken by the appellants in provision of ship crew management/ship management service to ESM Pte., Singapore as explained above does not get covered under the tax net of service tax. The appellants had entered into a Services Agreement dated 01.04.2013 with ESM Pte. Singapore for providing certain agreed services, as detailed in Appendix-I of this agreement. This contract covered the period from 01.04.2013 to 31.03.2016. Further, contract dated 01.04.2016 entered between the appellants and ESM Pte. Singapore, was of similarly worded but covered the period from 01.04.2016. For providing such services, the appellants are being paid an amount equal to applicable costs i.e., direct and indirect operating expenses of the appellants incurred in connection with providing the services, plus 8.70% (upto 31.03.2016) and 6.50% (from 01.04.2016) along with applicable taxes, if any. From plain reading of the legal provisions relating to Place of Provision of Services Rules, 2012 it clearly transpires that the place of provision of service in general has been specified under Rule 3 ibid, and in specific situations such as place of provision of performance-based services, provision of services relating to immovable property, provision of services relating to events, services provided at more than one location, services where provider and recipient are located in the taxable territory, provision of certain specified services have been specifically categorized and the place of provision in such cases have been given in the respective Rules 4, 5, 6, 7, 8 and 9 ibid respectively - since the services are provided in recruitment of ship crew and enabling them for the ocean voyage to be performed as per the directions of the service receiver ESM Pte., Singapore, which is situated out of taxable territory , the services provided by the appellant cannot be covered under the service tax net in terms of Section 66B ibid. There is no evidence on record to show that the appellants are receiving any consideration from the Ship/Vessel owners or any other person and as such, the services could not be termed as falling under the category of intermediary . Whether the services provided by the appellants could be treated as export of service or not? - HELD THAT - The appellants cannot not be said to be acting as an intermediary i.e., the services were performed by the appellants on a principal-to-principal basis and at arm s length basis. Inasmuch as all the conditions prescribed under Rule 6A of the Service Tax Rules, 1994 are satisfied, the services of the appellants are to be treated as export of services. Thus, the findings given by the learned Commissioner in the impugned order on this ground is also not sustainable. Extended period of limitation - HELD THAT - There are no specific grounds invoked for suppression of facts or willful mis-statement on the part of the appellants, particularly when the entire records of the appellants including periodical returns filed were available with the department. Thus, no effective case was made out in the SCN for invocation of extended period and for sustaining the same in the impugned order. Therefore, such order confirming the adjudged demands for extended period is patently illegal and therefore not sustainable, on the grounds of limitation. The Tribunal in the case of EASTERN PACIFIC SHIPPING (INDIA) P. LTD. VERSUS COMMR. OF CGST, MUMBAI EAST 2019 (10) TMI 1324 - CESTAT MUMBAI has held that appellant, a duly licensed Seafarer Recruitment service provider, as per agreement is not an intermediary particularly when entire process of selection, medical test, insurance, transportation etc. are carried out by him, for which he received payment in convertible foreign exchange from first party having its office in Singapore. It was held that services provided by him are to be considered as export of service. In the case of Ernst and Young Limited 2023 (3) TMI 1117 - DELHI HIGH COURT , the Hon ble High Court of Delhi had examined the scope of the term intermediary and held that the services provided by the appellants cannot be considered as intermediary services and it would fall within the scope of the definition of export of service . In another case relating to supply of services to foreign vendors in the case of SNQS International Socks Private Limited (Trading Division) Vs. Commissioner of Central Excise and Service Tax 2023 (6) TMI 1084 - CESTAT CHENNAI , the Tribunal has held that the services provided are in the nature of specified taxable services and not intermediary service and the place of provision in such export of services is the location of the service provider abroad. The impugned order is set aside - appeal allowed.
Issues Involved:
1. Liability of service tax on ship crew recruitment services provided by the appellants to ESM Pte. Singapore. 2. Classification of services as 'intermediary services' and whether they qualify as 'export of services' under the Place of Provision of Services Rules, 2012. 3. Invocation of the extended period of limitation for demanding service tax. Summary: 1. Liability of Service Tax on Ship Crew Recruitment Services: The appellants, M/s Executive Ship Management Private Limited, provided ship crew recruitment services to ESM Pte. Ltd., Singapore, claiming it as export of services and thus not liable for service tax. The DGGI concluded that these services were intermediary services, making the appellants liable to pay service tax under Rule 9(c) of the Place of Provision of Service Rules, 2012. The Commissioner confirmed the service tax demand along with penalties. 2. Classification as 'Intermediary Services' and 'Export of Services': The appellants argued that their services did not meet the criteria for intermediary services as clarified by the Board in Circular No. 159/15/2021-GST dated 20.09.2021 and various Tribunal decisions. They contended that they provided services on their own account to ESM Pte. Singapore, receiving payment in foreign currency, thus qualifying as export of services. The Tribunal examined the agreements and international maritime conventions, concluding that the services provided were not intermediary services but ship crew management services. The place of provision for these services is the location of the recipient, i.e., outside India, making them export of services under Rule 3 of the Place of Provision of Services Rules, 2012. 3. Invocation of Extended Period of Limitation: The appellants claimed that the extended period of limitation could not be invoked as there was no wilful misstatement or suppression of facts. The Tribunal referred to the Supreme Court judgment in Uniworth Textiles Ltd. Vs. Commissioner of Central Excise, Raipur, which held that the burden of proving mala fide conduct lies with the Revenue. The Tribunal found that the SCN did not provide specific grounds for invoking the extended period, making the confirmation of demands for the extended period unsustainable. Conclusion: The Tribunal set aside the impugned order dated 23.07.2021, holding that the services provided by the appellants were export of services and not liable for service tax. The appeal was allowed in favor of the appellants.
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