2017 (4) TMI 37 - AT - Service Tax

Export of services - Refund claim - unutilised CENVAT credit - denial on the ground that the services provided by the appellant appear to fall under the category of intellectual property service and not under engineering consultancy service as claimed by the appellant and also on the ground that the services were rendered in India and cannot be categorized as export. Held that - the services rendered by the appellant will fall under the category of taxable services provided or to be provided to any person by a consulting engineer in relation to advise, consultancy or technical assistance in any manner in one or more disciplines of engineering including the discipline of computer hardware engineering Section 65 (105) (g) . We also refer to the trade notice of the Department dated 04.07.1997 which explained the scope of tax entry. We note that the appellants are not involved in any service of intellectual property and do not come in possession of any such IPR. The terms of the agreement do not provide for payment of any consideration for transfer of any such IP Rights. The appellants are engaged in providing consultancy with reference to licensed unit in India for and on behalf of foreign entity. As such, based on the location of the recipient of service, the service is to be considered as exported. The benefit of service accrues to a foreign company and the said company pays consideration for such service. Since consulting engineering service also is a category (iii) service as mentioned in Export of Services Rules, 2005, the location of recipient of service is relevant. As such, the appellants were engaged in providing services, which are exported out of country. The appellant s eligibility to refund claim under Rule 5 of the Export of Services Rules, 2005 read with N/N. 12/2005- ST has to be examined - appeal allowed by way of remand.

Summary

Issues:
Classification of services for rebate claim eligibility under Export of Services Rules, 2005.

Analysis:
The appellant contested the order of the Commissioner (Appeals) regarding the rejection of their rebate claims under the Export of Services Rules, 2005. The dispute revolved around the classification of services provided by the appellant, specifically whether they fell under 'intellectual property service' or 'engineering consultancy service.' The original authority rejected the claims on the basis that the services seemed to be intellectual property services and were rendered in India, thus not qualifying as exports. The appellant argued that they were primarily engaged in providing engineering consultancy services in connection with licensed units in India, not involving intellectual property services. They emphasized that they did not acquire any intellectual property rights during their work and that their services were clearly classifiable under consulting engineering services, making them eligible for export classification.

The appellant's counsel highlighted the scope of services provided by the appellant to the foreign client, emphasizing that their work primarily involved engineering consultancy for licensed units in India. They argued that the rejection of their claims was solely based on the original authority's classification under intellectual property services, which was incorrect. The appellant did not receive any intellectual property rights and only provided consultancy services related to the erection and commissioning of licensed units in India. They contended that their services were exportable based on the location of the recipient and cited various legal cases to support their classification and export claims.

The Appellate Tribunal analyzed the terms of the agreement between the appellant and the foreign client, which clearly outlined the scope of work to be carried out by the appellant. The Tribunal concluded that the services provided by the appellant fell under taxable services offered by consulting engineers and did not involve intellectual property services. They noted that the appellant did not acquire any intellectual property rights and that the consideration received was for consultancy services related to licensed units in India. Citing legal precedents, the Tribunal affirmed that the services were exported out of the country based on the location of the service recipient. Consequently, the Tribunal held that the appellant's services were eligible for export classification under the Export of Services Rules, 2005.

In light of the above analysis, the Appellate Tribunal found the impugned order to be legally unsustainable and set it aside. The matter was remanded to the original authority for a fresh examination of the appellant's refund claims, with the appellant given the opportunity to submit all necessary evidence to support their claims. The appeal was allowed by way of remand, ensuring a thorough review of the appellant's eligibility for refund claims under the Export of Services Rules, 2005.