2024 (11) TMI 992 - AT - Service Tax

Classification of Services Provided - services as a steamer agent and a cargo handling agency - whether the services qualify as export of service? - since the service provided by the appellant is partly outside India, the same is covered by the definition of export of service - appellant is engaged in providing service of steamer agent in respect of vessels arriving at Kandla and other ports for discharging imported cargo and loading export cargo - appellant has got themselves registered under the category of steamer agent service covered u/s 65 (105) (i) of Finance Act, 1994, as also taken registration under the category of Cargo Handling Agency Service covered u/s 65(105) (zr) of Finance Act, 1994 HELD THAT - We find that the appellant have carried out the job of segregation and internal shifting of timber logs on behalf of foreign based principals as part of their obligation but also the appellant have sent progress reports of segregation and internal shifting to the service recipient i.e. foreign based principals. Therefore, the progress report is also indeed a part of over all part of important service activity without which the service provided by the appellant would not complete. From the above sub rule (ii) of Rule 3 of export of service rules, 2005 it is clear that the service falling under sub clause (zn) and (zr) which are subject matter of the present case, if partly performed outside India it shall be considered as performed outside India. In the present case as discussed above, the progress report was sent to the foreign principals which is the part of the overall service. Hence, the service is partly performed outside India, therefore, it qualifies as export of service in terms of Rule 3 (ii) of Export of Service Rules, 2005. In the identical facts where the service was performed in India but the reports of the sad service was sent to the foreign service recipient wherein it was held that performance of service not completed until progressive/analysis report delivered to the client. Delivery of report being essential part of service made outside India and used outside India. Such delivery of report to client outside India amounting to part of performance of taxable service outside India. As relying on SGS India Pvt Ltd 2011 (2) TMI 54 - CESTAT MUMBAI and B A Research India Ltd. 2009 (11) TMI 213 - CESTAT, AHMEDABAD we find that since in the present case the service is complete only when the progress report is sent to the foreign service recipient. The service is partly performed outside India. Therefore, it clearly falls under the definition of export of service in terms of Rule 3 (ii) of Export of Service Rules, 2005. It is also not in dispute that against the service provided by the appellant to their foreign principals they have received the payment remittance in convertible foreign exchange. Therefore, there is no doubt that the appellant have provided the export of service. Accordingly, the demand is not sustainable.

Summary

Issues Involved:

1. Classification of services provided by the appellant.
2. Determination of whether the services qualify as export of service.
3. Applicability of service tax on the services provided.

Detailed Analysis:

1. Classification of Services Provided by the Appellant:

The appellant is engaged in providing services as a steamer agent and a cargo handling agency, registered under Section 65 (105) (i) and (zr) of the Finance Act, 1994. The services involve segregation and internal shifting of timber logs within the port area and clearing vessels for export cargo. The appellant contends that these services fall under sub-clauses (zn) and (zr) of Clause (105) of Section 65 of the Finance Act, 1994. The classification of these services is crucial as it determines the applicability of service tax and the possibility of qualifying as export of service.

2. Determination of Whether the Services Qualify as Export of Service:

The appellant argues that the services provided are partly performed outside India, as they involve sending service completion reports to foreign principals. According to the Export of Service Rules, 2005, services performed partly outside India qualify as export of service. The appellant relies on several judicial precedents to support this claim, emphasizing that the delivery of reports to foreign clients is an integral part of the service. The tribunal examined the Export of Service Rules, 2005, particularly Rule 3(ii), which states that services partly performed outside India are considered as performed outside India. The tribunal found that the appellant's services, including the delivery of progress reports to foreign principals, are indeed partly performed outside India, thus qualifying as export of service.

3. Applicability of Service Tax on the Services Provided:

The central issue is whether the services rendered by the appellant are subject to service tax. The appellant did not collect or pay service tax, believing the services were exported. The tribunal referred to the Export of Service Rules, 2005, and relevant case law, including judgments in B A Research India Ltd and SGS India Pvt Ltd, which support the notion that services completed upon delivery of reports to foreign clients qualify as export of service. The tribunal concluded that since the appellant received payment in convertible foreign exchange and the services were partly performed outside India, they qualify as export of service. Consequently, no service tax is demandable on such export of service, rendering the department's demand unsustainable.

Conclusion:

The tribunal set aside the impugned order, allowing the appeal with consequential relief. The services provided by the appellant were deemed to qualify as export of service, exempting them from service tax liability. The decision underscores the importance of the location of service performance and the receipt of payment in foreign exchange in determining the applicability of service tax.