2019 (10) TMI 1107 - AT - Service Tax

Exemption from service tax - Business auxiliary services - export of services or not - Ld. Commissioner held that since the services were not delivered outside India, the conditions laid down in the Export Rules were allegedly not satisfied - HELD THAT - The Ld. Commissioner in his impugned order has accepted that the services provided by the assessee have been used outside India and that the payment for the said services have been received in convertible foreign exchange. He has however observed that since the products of the Foreign Company have been marketed or sold to customers in India, the services are not delivered outside India. The identical issue has been dealt by the Tribunal in M/S AIRBUS GROUP INDIA PVT. LTD. VERSUS CST, DELHI 2016 (7) TMI 1209 - CESTAT NEW DELHI for the period 2006 to 2011 wherein it has been held that the services provided by assessee would qualify as export of service even if the activities were undertaken in the Indian soil upon the instructions of service recipient located outside India. There is force in the submission of the Ld. Counsels for the assessee regarding the fact that the sale of the products and services manufactured or provided by the Foreign Company have been made by the assessee to the Indian customer / client is completely immaterial inasmuch as the assessee has provided the services at the behest of service recipient located outside India - thus, the subject services are to be held to be used outside India as well as delivered outside India and therefore, constitutes export of service on which no service tax stands payable. The impugned demand of service tax is set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Interpretation of Export of Services Rules, 2005 for service tax levy.
2. Determination of whether services rendered constitute 'export of service.'
3. Assessment of tax liability based on the location of service recipient.

Analysis:

Issue 1:
The case involved an appeal against an Order-in-Original passed by the Commissioner of Service Tax, Kolkata. The Tribunal had earlier remanded the case, noting that DGCEI lacked the authority to issue the notice, citing a Delhi High Court decision. The High Court directed a reasoned order without considering the legal issue of DGCEI's competence.

Issue 2:
The appellant, a company acting as an exclusive representative of a Foreign Company in India, claimed exemption from service tax under Export of Services Rules, 2005. The Commissioner, while acknowledging services were used outside India, held that since the products were marketed in India, services were not delivered outside India. The appellant argued that services fulfilled Export Rules requirements and relied on case laws supporting the export of services when the recipient is located abroad.

Issue 3:
The Revenue contended that services were confined to India as end buyers were in India, thus not constituting export of service. The Tribunal examined previous decisions and held that services provided in India, but used by foreign companies, qualified as export of service. Citing legal precedents, the Tribunal concluded that services were used and delivered outside India, exempting the appellant from service tax liability.

In conclusion, the Tribunal set aside the demand for service tax, allowing the appeal by the assessee and rejecting the Revenue's appeal. The decision was based on the interpretation of Export of Services Rules, 2005, and established legal principles regarding the location of service usage and recipient for determining the export of services.