2017 (9) TMI 358 - AT - Service Tax

Business Auxiliary Services - export of services or not - whether or not the appellant received the consideration for service, in convertible foreign exchange? - Held that - It is relevant to note that when a service is provided to a person located abroad and the conditions is payment of consideration in convertible foreign exchange, the same shall stands satisfied, if the recipient of service transfers the money from his account which is in convertible foreign currency and remitted to Indian provider of service. The credit to account of Indian recipient of money at the bank of Indian recipient, will necessarily be in Indian rupees. It is apparent that no foreign exchange amount can be credited in bank located in India. The transactions are in Indian rupees - In Sun Area Real Estate Pvt. Ltd. 2015 (5) TMI 885 - CESTAT MUMBAI , it was held that the FIRC issued certifying that the payment not received in non-convertible rupees establishes payment in foreign exchange. Such payment in rupees is equal to foreign exchange - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant received payment in convertible foreign exchange for the services provided.
2. Whether the demand for service tax liability and penalty imposed on the appellant is sustainable.
3. Whether the appellant fulfilled the conditions for categorizing the services as exports under the "Business Auxiliary Services" category.

Analysis:
1. The main issue in the appeal was whether the appellant received payment in convertible foreign exchange for the services provided. The appellant argued that the payment was made in conformity with the statutory provisions of the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management Regulations 2000. The appellant presented evidence, including a Foreign Inward Remittance Certificate (FIRC) issued by the Bank, to support the claim that payment was made in foreign exchange but credited to the appellant's account in India in rupees. The Tribunal examined the evidence and found that the payment was indeed received in convertible foreign exchange, satisfying the condition for export of service.

2. The appellant contested the demand for service tax liability and penalty, arguing that the demand was not sustainable as it was issued beyond the normal period and that the necessary information was available in the periodic returns filed by the appellant. The Tribunal noted that there were several litigations on the issue of export of services under the category of "Business Auxiliary Service." The Tribunal found that the demand was not sustainable based on the legal and factual analysis presented, setting aside the impugned order and allowing the appeal.

3. The dispute also revolved around whether the services provided by the appellant qualified as exports under the "Business Auxiliary Services" category. The appellant argued that the conditions for export of service were fulfilled, particularly regarding the receipt of payment in convertible foreign exchange. The Tribunal referred to relevant regulations and previous case law to support the appellant's position that the payment received in rupees from a foreign account constituted payment in foreign exchange. The Tribunal's analysis of legal and factual issues led to the conclusion that the impugned order was without merit, ultimately setting it aside and allowing the appeal.

In conclusion, the Tribunal's detailed analysis of the evidence, legal provisions, and previous judgments led to the setting aside of the impugned order, thereby allowing the appellant's appeal against the service tax liability and penalty imposed.