2023 (8) TMI 246 - AT - Service Tax

Exemption from payment of service tax - export of service - business auxiliary service (BAS) - applicability of POPOS Rules - period of dispute from 01.07.2012 to 31.03.2015 - extended period of limitation - HELD THAT - The issue stands decided in favour of the appellant by a larger bench of the Tribunal in M/S. ARCELOR MITTAL STAINLESS (I) P. LTD (NOW KNOWN AS M/S. ARCELOR MITTAL DISTRIBUTION SOLUTIONS INDIA PRIVATE LIMITED) VERSUS COMMISSIONER SERVICE TAX MUMBAI-II 2023 (8) TMI 107 - CESTAT MUMBAI . The factual position before the larger bench was that a prospective customer in India was approached by Arcelor India and the request was forwarded by Arcelor India to the foreign entity which ultimately supplied the goods to the Indian customers. For the service provided by Arcelor India to the foreign entity i.e. Arcelor France, Arcelor India received commission in convertible foreign currency. The department believed that service tax was leviable on this commission received by Arcelor India since the services were performed and consumed in India and they would not qualify as export of service. This contention was repelled by the larger bench and it was observed that though the goods were being supplied to customers in India, the actual recipient of BAS provided by Arcelor India is Arcelor France. Thus, irrespective of whether the 2005 Export Rules or the 2012 Rules are applicable, the appellant would render export of service which was not taxable till 01.10.2014, whereafter it became taxable as the appellant became an intermediary. Extended period of limitation - HELD THAT - In the present case, the appellant, as is seen from the impugned order, had filed ST-3 Returns for the period from July 2012 to September 2014 and had shown the whole commission earned during the relevant period. The order also takes notice of the fact that the appellant had by a letter dated 31.07.2012 revealed to the department that it was providing services to the foreign entity for the products sold in India and that it had received commission payment for such services. It also needs to be noted that these facts had been brought to the notice of the department on 31.07.2012, but the show cause notice was issued to the appellant only on 03.09.2014 - the extended period of limitation could not have been invoked. It is, therefore, evident that not only had the appellant rendered export of service , be it under the 2005 Rules or under the 2012 Rules, but the extended period of limitation also could not have been invoked in the facts and circumstances of the case. - the impugned order dated 22.02.2017 passed by the Commissioner (Appeals), therefore, cannot be sustained and is set aside - appeal allowed.

Summary

Issues Involved:
1. Applicability of the 2005 Export Rules vs. the 2012 Rules.
2. Classification of services as 'export of service' or 'business auxiliary service' (BAS).
3. Invocation of the extended period of limitation.

Summary:

1. Applicability of the 2005 Export Rules vs. the 2012 Rules:
The appellant contended that the 2005 Export Rules were not applicable for the period from 01.07.2012 to 31.03.2015 as they were superseded by the Place of Provision of Services Rules 2012 (2012 Rules). The Tribunal noted that w.e.f. 01.07.2012, the 2012 Rules would apply, as the notification clearly mentioned that the 2005 Export Rules had been superseded. Rule 3 of the 2012 Rules states that the place of provision of a service shall be the location of the recipient of service.

2. Classification of Services:
The appellant argued that their services should be classified as 'export of service' under the 2012 Rules. The Tribunal observed that the appellant provided services to a foreign supplier, received payment in convertible foreign exchange, and the recipient of the service was located outside India. Therefore, under Rule 3 of the 2012 Rules and Rule 6A of the Service Tax Rules 1994, the services provided by the appellant qualified as 'export of service'. The Tribunal also referenced a larger bench decision in M/s. Arcelor Mittal Stainless (I) P. Ltd. vs. Commissioner of Service Tax, which supported the appellant's position that the services provided to a foreign entity were 'export of service'.

3. Invocation of the Extended Period of Limitation:
The Tribunal held that the extended period of limitation could not be invoked. The Commissioner (Appeals) had sustained the invocation of the extended period on the basis that the appellant could have sought clarification from the department. However, the Tribunal referenced the Delhi High Court judgment in Mahanagar Telephone Nigam Ltd. vs. Union of India, which stated that there is no requirement for seeking clarification from the jurisdictional service tax authority if the assessee believes the amount received was not chargeable to service tax. The Tribunal noted that the appellant had filed ST-3 Returns and disclosed the commission earned, and the show cause notice was issued only on 03.09.2014, despite the department being informed on 31.07.2012.

Conclusion:
The Tribunal concluded that the services provided by the appellant were 'export of service' under both the 2005 and 2012 Rules and that the extended period of limitation could not be invoked. Consequently, the impugned order dated 22.02.2017 passed by the Commissioner (Appeals) was set aside, and the appeal was allowed.