2024 (5) TMI 1149 - AT - Service Tax

Demand of service tax - Whether the appellant provided export of service under the provisions of the Export Rules, 2005 - services delivered and used outside India and the commission income is received in convertible foreign exchange from its group companies - HELD THAT - In the present case, as noticed, in terms of the agreement between the appellant and group companies situated outside India which did not have any permanent establishment in India, the appellant solicited orders for supply of the products of the group companies for which the appellant received commission in convertible foreign exchange. The Commissioner, in view of the decision of the larger bench of the Tribunal in Arcelor Mittal 2023 (8) TMI 107 - CESTAT MUMBAI-LB , was not justified in holding that since the services were used and provided in India, the same would not constitute export of service . The order dated 26.03.2013 passed by the Commissioner, therefore, cannot be sustained and is set aside. The appeal is, accordingly, allowed.

Summary

Issues Involved:
The judgment involves the issue of whether the appellant provided "export of service" under the provisions of the Export Rules, 2005.

Comprehensive Details:

1. Background and Allegations:
The appellant, M/s Gea Westfalia Separator India P. Ltd., contested the order passed by the Commissioner of Central Excise, New Delhi II, confirming the demand of service tax u/s 73(1) of the Finance Act, 1994. The appellant entered into agreements with group companies outside India for marketing products in India and received commission in convertible foreign exchange.

2. Contention and Tax Payment:
The appellant believed that services provided outside India and income received in foreign exchange constituted "export of service" u/r 3 of the Export Rules, 2005. Service tax was paid until August 2007 and rebate claims were filed. From September 2007 to 2011, services were exported without tax payment.

3. Show Cause Notice and Order:
A show cause notice was issued for the period 2006-07 to 2010-11, alleging services as "business auxiliary services." The appellant denied the allegations, but the Commissioner held that services provided and used in India did not qualify as "export of service."

4. Legal Precedent and Arguments:
The appellant cited a Tribunal judgment in M/s Arcelor Mittal case supporting their position. The department, represented by Shri S.K. Ray, supported the impugned order, stating no interference was necessary.

5. Tribunal Decision and Ruling:
The Tribunal referred to the Arcelor Mittal case, where a similar arrangement was considered as "export of service." The Tribunal concluded that the appellant's services, provided to foreign entities outside India and paid in foreign exchange, constituted "export of service" as per the Export Rules, 2005.

6. Final Verdict:
The Tribunal found the Commissioner's order unjustified in light of the Arcelor Mittal decision and set it aside, allowing the appeal of M/s Gea Westfalia Separator India P. Ltd. The judgment was pronounced in the open court, overturning the earlier decision.