2017 (9) TMI 1493 - AT - Service Tax

Export of services or not? - appellant was rendering Technical Knowhow agreement with a Nigerian Firm - time limitation - Held that - It can be seen from the records, that letter dated 23.07.2010 is only informing the department as to receipt of Technical Knowhow for the financial year 2008-2009 and is absolutely silent on the services rendered during the period in question. It is also on record that the appellant being a service provider, should have indicated the said services rendered by them in the half yearly returns which it seems is not done so - on limitation, the appeal fails. Whether the demand arising from transactions not treatable as export on the solitary ground that the consideration was not received in foreign currency; is legally sustainable? - Held that - Admittedly, the receipt in foreign currency is a condition prevalent in the law at all times, in order to consider the transaction as an export transaction - Since the appellant contends that the figure adopted is merely a provision for accounting purpose, and does not represent the actual receipt; and also that it continues to be shown as receivable in the final accounts clearly affects the levy. The impugned order admittedly failed to address the appellant s contentions on this aspect inter alia; and this leads to the inference that the principles of natural justice were indeed violated. The ends of justice would therefore be met if the matter is remitted to the lower authority to examine the facts against the corresponding legal provisions. Appeal allowed by way of remand.

Summary

Issues:
1. Consideration of demands confirmed by lower authorities for the period 2009-2010 to 2012-2013.
2. Limitation on the demand of tax for the financial year 2008.
3. Merits of the case regarding the tax liability for services rendered to a Nigerian firm.
4. Whether the demand arising from transactions not treatable as export due to consideration not received in foreign currency is legally sustainable.

Analysis:
1. The appeal addressed the demands confirmed by lower authorities for the period 2009-2010 to 2012-2013. The appellant had an agreement with a Nigerian firm for Technical Knowhow supply, but failed to discharge service tax liability for consideration received. The First Appellate Authority upheld the demands, leading to the appeal. The issue revolved around the correctness of the demands confirmed.

2. The limitation on the demand of tax for the financial year 2008 was a crucial aspect. The appellant argued that a letter in 2010 informed the department about the Technical Knowhow agreement with the Nigerian firm, establishing revenue's awareness. However, the appellate authority rejected the limitation argument based on detailed findings, emphasizing that the notice relied on audit reports and provisions supporting the demands for the material period, despite the appellant's contentions.

3. Regarding the merits of the case, it was acknowledged that the appellant rendered services to the Nigerian firm during the period in question. The First Appellate Authority confirmed the tax demand based on the consideration not received in foreign currency, even though a joint venture with the Nigerian firm was initiated. The appellate tribunal concurred with the lower authority's findings on the tax liability and the demand's legal sustainability.

4. The issue of demand arising from transactions not treated as export due to consideration not being received in foreign currency was extensively discussed. The tribunal highlighted that the law required foreign currency receipt to consider a transaction as an export transaction. The tribunal found that the demand's foundation was unclear and legally untenable, emphasizing that the impugned order failed to address the appellant's contentions adequately. Consequently, the matter was remitted to the lower authority for denovo consideration, ensuring proper verification of facts and adherence to legal provisions.

In conclusion, the tribunal rejected the appeal, finding the impugned order correct and legal. The judgment emphasized the need for proper examination of facts and compliance with legal provisions in tax matters, ensuring the principles of natural justice are upheld throughout the proceedings.