2017 (6) TMI 117 - AT - Service Tax

Manpower recruitment agency - appellant also providing the services abroad for which they are of the belief that it is export of service and accordingly, no service tax was paid - case of Revenue is that the service provided in abroad is not export of service for the reason that in some of the cases though the service charge was received in foreign currency but DFRC was not submitted. In some of the cases, the service charge was received in Indian Rupees - Held that - as per the statutory provision, the only requirement is that against the export of service payment should be in convertible foreign exchange. If that is satisfied even though the DFRC is not submitted the status of the export cannot be rejected as DFRC is only a procedural requirement. If otherwise it is established the payment was received in foreign exchange the same is to be accepted as an export of service - As regards the cases where the payment was received in Indian Rupees we find that there is no dispute that the payment though in Indian Rupees but received through foreign banks i.e. HSBC, Bank of Bahrain and Kuwait. On both counts when the payment received in foreign exchange as well as payment received in Indian Rupees, but through foreign banks the services provided in abroad is indeed export of service - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Determining whether services provided abroad qualify as export of service for service tax exemption.

Analysis:
The case involved a dispute regarding the classification of services provided abroad by an appellant engaged in manpower recruitment agency services, concerning the applicability of service tax. The appellant contended that services provided abroad should be considered as export of service, thereby exempt from service tax. The department argued that certain criteria, such as the submission of DFRC and receiving payment in foreign currency, were not met, leading to the demand for service tax.

Upon review, the Tribunal analyzed the facts and legal provisions. The appellant demonstrated that services were indeed provided abroad, with payments received in both foreign exchange and Indian Rupees through foreign banks. Citing the case of Sun-Area Real Estate Pvt Ltd, the Tribunal emphasized that payments in Indian Rupees through foreign banking channels qualify as convertible foreign exchange.

The Tribunal disagreed with the department's stance, highlighting that the essential requirement for export of service is receiving payment in convertible foreign exchange. The absence of DFRC was deemed a procedural issue that should not negate the export status. Therefore, the Tribunal concluded that services provided abroad, with payments in foreign exchange or Indian Rupees through foreign banks, met the criteria for export of service, warranting exemption from service tax.

In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeal, determining that the services provided abroad qualified as export of service and were not subject to service tax. The judgment was pronounced on 03.05.2017.