2025 (2) TMI 953 - AT - Service Tax

Exemption from service tax - advisory services provided by the appellant to JCB UK - export of service under Rule 6A of the Service Tax Rules 1994 or not - place of provision of service - HELD THAT - In the instant case it is not disputed that JCB (UK) is a company incorporated under the laws of United Kingdom and is located in United Kingdom. Therefore the UK office of JCB would qualify as its business establishment where decisions pertaining to the company are taken. Consequently the services rendered by the Appellant would be considered as received at the business establishment of JCB UK in terms of Rule 2(i)(b)(i) of the POPS Rules. Accordingly the location of the recipient of service for purposes of Rule 3 would be United Kingdom which is outside the taxable territory of India. The taxability of such transactions where rendition of service resulting in business growth in India stands decided in favour of the appellant by the Larger Bench of the Tribunal in the case of M/S. ARCELOR MITTAL STAINLESS (I) P. LTD (NOW KNOWN AS M/S. ARCELOR MITTAL DISTRIBUTION SOLUTIONS INDIA PRIVATE LIMITED) VERSUS COMMISSIONER SERVICE TAX MUMBAI-II 2023 (8) TMI 107 - CESTAT MUMBAI-LB wherein the Tribunal held It is therefore clear that the recipient of service is the person at whose desire the activity is done in exchange for a consideration i.e. the person who is obliged to make payment for the service. The recipient of service would therefore be a person at whose instance and expense the service is provided whether or not he is the beneficiary of the service. From the above in the context of the present case it is noted that the recipient of the service is JCB UK who is also the person at whose desire the activity is done in exchange of monetary consideration. Conclusion - The services rendered by the appellant were exports thus not subject to service tax. The impugned order is set aside - appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core legal question in this case was whether the advisory services provided by the appellant to JCB UK qualified as an "export of service" under Rule 6A of the Service Tax Rules, 1994, thereby exempting them from service tax liability. The determination of the place of provision of service under the Place of Provision of Service Rules, 2012 (POPS Rules) was central to this issue.

ISSUE-WISE DETAILED ANALYSIS

1. Determination of Place of Provision of Service

The relevant legal framework involved Rule 3 of the POPS Rules, which generally states that the place of provision of a service is the location of the recipient of the service. The appellant argued that since JCB UK, the recipient, was located in the United Kingdom, the services should be considered as provided outside India. The court examined the definition of "location of the service receiver" under Rule 2(i) and concluded that JCB UK's business establishment in the UK qualified as the location of the recipient. Thus, the place of provision was outside the taxable territory of India.

2. Qualification as Export of Service under Rule 6A

For services to qualify as an export under Rule 6A, several conditions must be met: the service provider must be in the taxable territory, the recipient must be outside India, the service must not be specified in the negative list, the place of provision must be outside India, payment must be received in foreign exchange, and the provider and recipient must not be merely establishments of a distinct person. The court found that all these conditions were satisfied in the appellant's case, as the services were provided to JCB UK, located outside India, and payment was received in foreign currency.

3. Calculation of Service Tax Demand

The appellant contested the calculation of the service tax demand, arguing that the applicable rate should be determined based on the point of taxation as defined under the Point of Taxation Rules, 2011. The court agreed with the appellant's interpretation, noting that the point of taxation should be the date of invoice issuance, which was earlier than the date of payment receipt or service provision. Consequently, the applicable service tax rates for different financial years were lower than those applied in the impugned order.

4. Invocation of Extended Period of Limitation

The appellant argued that the demand for the period 2014-15 was beyond the permissible period of five years and that the extended period of limitation could not be invoked without establishing fraud, collusion, or willful misstatement. The court noted that the show cause notice did not establish any such grounds for invoking the extended period, thereby rendering the demand time-barred for that period.

5. Competing Arguments on Service Utilization

The department contended that the services were utilized in India, as the advisory role was related to JCB's Indian operations, and meetings were held in India. However, the court emphasized that the location of the recipient, not the place of service utilization, was determinative under Rule 3 of the POPS Rules. The court found that the department's focus on service utilization was misplaced.

SIGNIFICANT HOLDINGS

The court held that the services provided by the appellant qualified as an export of service and were not exigible to service tax. The court emphasized the principle that the location of the service recipient is crucial in determining the place of provision of service under Rule 3 of the POPS Rules. The court also underscored that all conditions under Rule 6A for export of service were met.

Core Principles Established

The judgment reinforced the interpretation that the place of provision of service is determined by the recipient's location, as per Rule 3 of the POPS Rules, and that services qualifying as exports under Rule 6A are exempt from service tax. It also clarified the application of the point of taxation rules in determining the applicable service tax rate.

Final Determinations on Each Issue

The court concluded that the services rendered by the appellant were exports, thus not subject to service tax. It also found that the demand for the period 2014-15 was time-barred and that the service tax rates applied in the impugned order were incorrect. Consequently, the court set aside the impugned order and allowed the appeal.

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