2014 (9) TMI 878 - AT - Service Tax

Export of services - Receipt of commission in convertible foreign exchange from their principal - Revenue was of the view that since the dividends have been repatriated and since dividends arise out of the appellant company s activities including exports, it would amount to repatriation of export proceeds - Benefit of Notification No. 6/99, dated 9-4-99 and 21/2003-S.T., dated 21-11-2003 - Held that - Appellant has rendered the service of steamer agents and has earned income in convertible foreign exchange. Vide Notification Nos. 6/99-S.T. and 21/2003-S.T., Service Tax levy has been exempted if consideration for the services rendered is received in convertible foreign exchange subject to the condition that the export proceeds are not repatriated from India - On perusal of the balance-sheet of the appellant company, it is seen that appellant earns income not only from steamer agent s services but also from various other services such as container freight, equipment maintenance and repair, service-centre income, detention/collection fees, crew fees and so on. They have also earned income by way of interest on loans/deposits and also rental income - After deducting the expenses from the income, profit is arrived at and dividend is declared out of profits. In other words, the dividend declared is not only from the income earned from steamer agent services rendered by the appellant and profits earned therefrom but from a lot of other activities. Therefore, it cannot be said that the export proceeds earned by the appellant have been repatriated by way of dividends to the equity holder - Decision in the caes of Gillette India Ltd 2011 (5) TMI 611 - CESTAT, NEW DELHI followed - Decided in favour of assessee.

Summary

Issues:
Service Tax demand on repatriation of dividends from export proceeds.

Analysis:
The appeal challenged a Service Tax demand against the appellant, a steamer agent, for repatriating dividends to their foreign principal. The Revenue argued that repatriation of dividends from export activities did not qualify for tax exemptions. The appellant contended that dividends to foreign equity holders did not equate to repatriation of export proceeds. They cited a previous tribunal decision to support their claim. The Revenue reiterated the adjudicating authority's findings.

The Tribunal examined the appellant's income sources, including services beyond steamer agency, and noted various revenue streams like container freight, maintenance, and rental income. They emphasized that dividends were declared from profits derived not only from steamer agency services but also from other activities. The Tribunal referred to a previous case involving Gillette India Ltd. to support their stance. They clarified that the dividend declared was not solely from steamer agency profits but from a range of activities, hence not constituting repatriation of export proceeds.

Ultimately, the Tribunal found the Revenue's arguments lacking merit. They concluded that the appellant's dividend distribution did not amount to repatriation of export proceeds. Citing the Gillette India Ltd. case, the Tribunal emphasized that the Revenue's interpretation was incorrect. As a result, the impugned order was set aside, and the appeal was allowed.