2010 (1) TMI 143 - AT - Service Tax

Rebate of service tax - Rule 5 of the Export of Services Rules, 2005 - . Upon receipt of price of the goods, the suppliers paid commission to the appellant in convertible foreign exchange. Service tax was paid on these payments under Section 65(105)(zzb) of the Finance Act, 1994. Adjudicating authority refused to accept the contention of the appellant that the service provided by them to the foreign suppliers had been delivered outside India and used outside India. In the result, the claim for rebate of service tax was rejected. Refund of service tax to the extent of Rs.8,02,364/- stands denied to the appellant for the period from 19.4.2006 to 31.12.2006. Held that The rendering of the service was complete only when the purchase orders canvassed by the appellant in India were received by the foreign companies. These purchase orders were, admittedly, received abroad. They were also, admittedly, acted upon by the foreign companies abroad. In other words, the benefit of the service provided by the appellant accrued to the foreign companies outside India. The condition in question stood fulfilled by the appellant. Refund allowed decided in favor of assessee.

Summary

Issues:
- Rejection of claims for rebate of service tax paid by the appellant as a commission agent.
- Interpretation of conditions for rebate of service tax under Rule 5 of the Export of Services Rules, 2005.
- Denial of refund of service tax by lower authorities.
- Clarification on the phrase "used outside India" in the context of business auxiliary services.
- Application of relevant legal provisions and circulars to determine eligibility for rebate of service tax.

Analysis:
1. The appellant filed an appeal against the rejection of claims for rebate of service tax paid as a commission agent. The appellant procured purchase orders in India for suppliers of goods located abroad, who exported the goods to buyers in India and paid commission to the appellant in foreign exchange. The claim for rebate was made under Rule 5 of the Export of Services Rules, 2005, which specified conditions including the service being delivered outside India and payment received in convertible foreign exchange.

2. The lower authorities acknowledged the receipt of commission in foreign exchange but refused to accept that the service provided by the appellant was delivered and used outside India. Consequently, the claim for rebate of service tax was rejected, leading to the denial of a refund amounting to Rs. 8,02,364 for a specific period.

3. The Tribunal found that the denial of refund was contrary to the law as clarified in a CBEC circular, which stated that the benefit of the service accruing outside India could constitute export of service even if the activities took place in India. The service provided by the appellant, classified as business auxiliary services, met the conditions for export as per Rules 3 and 5 of the Export of Services Rules, 2005. The appellant's activities, including procuring purchase orders in India and transmitting them abroad, resulted in the benefit accruing outside India, fulfilling the conditions for rebate.

4. The Tribunal referred to previous decisions supporting the appellant's case, such as Blue Star Ltd. vs. CCE, ABS India Ltd. vs. CST, and CST, Ahmedabad vs. B.A. Research India Ltd., where the benefit of export was derived by recipients outside India. The Tribunal set aside the impugned order and allowed the appeal, emphasizing that the business auxiliary service provided by the appellant was delivered and used outside India, making them eligible for the rebate of service tax.

This detailed analysis highlights the key legal issues, the application of relevant rules and circulars, and the Tribunal's decision in favor of the appellant regarding the rebate of service tax.