2025 (3) TMI 386 - HC - Service Tax

Denial of refund of Input Tax Credit (CENVAT Credit) under Rule 5 of the CENVAT Credit Rules 2004 - export of services or not - interpretation of Rule 6A of the Service Tax Rules 1994 and Rules 3 4 and 6 of the Place of Provision of Services Rules 2012 - POPOS Rules - HELD THAT - Rule 6 of the Place of Provision of Services Rules 2012 will apply only to services provided by way of admission to or organization of a cultural artistic sporting scientific educational or entertainment event or a celebration conference fair exhibition or similar events and of services ancillary to such admission and not to mere participation in a trade fair to promote the products of the said group Company namely Hypertherm (S) Private Limited Singapore. Although in the Impugned Order-in-Original a reference has been made to Rule 14 of the Place of Provision of Services Rule 2012 it has to be stated that the aforesaid Rule will apply only where the provision of service is prima facie determinable in terms of more than one Rule in which case the place of provision of service shall be determined in accordance with the Rules that occurs later among the many Rules that merit equal consideration. Hence this is not the situation under contemplation in the facts of the present case and therefore reference to the aforesaid Rule was irrelevant in the Impugned Orders. It is clear that only Rule 3 of the Place of Provision of Services Rules 2012 is to be applied even if the service is provided in India. Despite the fact that service is provided in India to a recipient located outside the taxable territory it is deemed to have been provided abroad if the conditions of Rule 6A of the Service Tax Rules 1994 are satisfied. In these cases admittedly services were provided by the Petitioner to Hypertherm (S) Private Limited a Company from Singapore. Therefore there is export of service. The payments have been received by the Petitioner in convertible foreign exchange for the export of service to its group Company namely Hypertherm (S) Private Limited Singapore. This also satisfies the requirement of Rule 6A(1)(e) of the Service Tax Rules 1994. Since payment was received in Convertible Foreign Exchange it has to be held that there was export of service. Conclusion - The Petitioner is not liable to pay service tax under the provisions of the Finance Act 1994. The Petitioner is entitled to refund of Input Tax Credit (CENVAT Credit) under Rule 5 of the CENVAT Credit Rules 2004. The case is remitted back to the Respondents to segregate those services which are deemed to be provided outside India in terms of Rule 3 of the Place of Provision of Services Rules 2012 and those services which are deemed to have been provided in India as per Rule 6 of the Place of Provision of Services Rules 2012 - Petition disposed off by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the services provided by the petitioner to its subsidiary, M/s. Hypertherm (S) Pte. Ltd., Singapore, qualify as "export of services" under Rule 6A of the Service Tax Rules, 1994.
• Whether the petitioner is liable to pay service tax for the services provided to its subsidiary under the Finance Act, 1994.
• Whether the petitioner is entitled to a refund of Input Tax Credit (CENVAT Credit) under Rule 5 of the CENVAT Credit Rules, 2004.
• The applicability of the Place of Provision of Services Rules, 2012, specifically Rules 3, 4, and 6, in determining the place of provision of services.

ISSUE-WISE DETAILED ANALYSIS

1. Qualification as "Export of Services" under Rule 6A of the Service Tax Rules, 1994

• Relevant Legal Framework and Precedents: Rule 6A of the Service Tax Rules, 1994, defines the criteria for a service to be considered as an export. The conditions include the provider being in a taxable territory, the recipient being outside India, and the place of provision of the service being outside India, among others.
• Court's Interpretation and Reasoning: The Court noted that the services provided by the petitioner were to a recipient located outside India (Singapore), and payments were received in convertible foreign exchange, satisfying the conditions of Rule 6A.
• Key Evidence and Findings: The petitioner provided services such as market research and marketing services to its subsidiary in Singapore, and payments were received in foreign currency.
• Application of Law to Facts: The Court applied Rule 6A and concluded that the services qualify as exports since the recipient is located outside India, and payments were received in convertible foreign exchange.
• Treatment of Competing Arguments: The respondents argued that the services were performed in India, thus not qualifying as exports. The Court disagreed, emphasizing the location of the service recipient as the determining factor.
• Conclusions: The services qualify as "export of services," and the petitioner is not liable to pay service tax under the Finance Act, 1994.

2. Entitlement to Refund of Input Tax Credit (CENVAT Credit)

• Relevant Legal Framework and Precedents: Rule 5 of the CENVAT Credit Rules, 2004, allows for a refund of unutilized input tax credit in cases of export of services.
• Court's Interpretation and Reasoning: Since the services were deemed exports, the petitioner is entitled to a refund of the input tax credit.
• Key Evidence and Findings: The petitioner had claimed a refund for the input tax credit on services provided to its subsidiary.
• Application of Law to Facts: The Court directed the respondents to process the refund claim as the services qualify as exports.
• Treatment of Competing Arguments: The respondents' argument against the refund was based on the non-export status of the services, which the Court found incorrect.
• Conclusions: The petitioner is entitled to a refund of the input tax credit.

3. Applicability of the Place of Provision of Services Rules, 2012

• Relevant Legal Framework and Precedents: Rules 3, 4, and 6 of the Place of Provision of Services Rules, 2012, determine the place of provision of services.
• Court's Interpretation and Reasoning: The Court found that Rule 3, which states the location of the service recipient as the place of provision, is applicable. Rules 4 and 6 were deemed irrelevant in this context.
• Key Evidence and Findings: The services were provided to a recipient in Singapore, making Rule 3 applicable.
• Application of Law to Facts: The Court applied Rule 3, confirming the location of the recipient as the place of provision.
• Treatment of Competing Arguments: The respondents' reliance on Rules 4 and 6 was rejected as misplaced.
• Conclusions: Rule 3 is applicable, confirming the services as exports.

SIGNIFICANT HOLDINGS

• Verbatim Quotes: "The main rule or the default rule provides that a service shall be deemed to be provided where the receiver is located."
• Core Principles Established: The location of the service recipient determines the place of provision of services, and services provided to a recipient outside India qualify as exports if other conditions are met.
• Final Determinations on Each Issue: The services qualify as exports, the petitioner is not liable for service tax, and is entitled to a refund of the input tax credit.