2024 (12) TMI 1194 - AT - Service Tax

Classification of services - Whether the services rendered by the appellant to overseas universities/colleges amounts to Export of Service as contended by appellants or it is intermediary service as alleged by the department? - Invocation of Rule 9 of Export of Service Rules - Extended period of limitation. Classification of services - Whether the services rendered by the appellant to overseas universities/colleges amounts to Export of Service as contended by appellants or it is intermediary service as alleged by the department? - HELD THAT - It is observed that in all contracts with the foreign universities, it is explicitly written that NNCCPL is not an agent of such universities. There is a clear denial of agent-principal relationship in the Agreement itself. All the conditional as laid down in Rule 6A of Service Tax Rules, 1994 are held satisfied in the present case. Though department s stand is that place of provision of service is taxable territory as the services are provided to Indian students. But the services as mentioned above have been rendered by the appellants for promotion and publicity of foreign universities among Indian students. The agreement for the same is between appellant and foreign universities. There is no agreement of appellant with Indian students. The amount in question is received from foreign universities in convertible foreign exchange and not from Indian students. The students are paying fees in case of getting admission, to the foreign university only. These observations are sufficient for us to hold that Indian students are not the service recipients of the impugned services rendered by the appellants. The place of provision is wrongly held to be in taxable territory (India). Hence foreign consultancy services provided by an assessee amounts to Export of services and they are outside the ambit of service tax and they are wrongly alleged as being rendered by intermediary. The fundamental principle enunciated by the Apex Court in ALL INDIA FEDERATION OF TAX PRACTITIONERS ORS VERSUS UNION OF INDIA ORS 2007 (8) TMI 1 - SUPREME COURT is that service tax is a destination based consumption tax, leviable only on services provided within the country. The provision of Section 66B of the Act, explicitly provides that for service tax to be levied in terms of Chapter V of the Act, the service had to be provided within the taxable territory. But in case where services are provided outside the 'taxable territory', where the service provider is in India and the recipient of service is located outside India, in normal parlance it would be export of service. Invocation of Rule 9 of Export of Service Rules - HELD THAT - The services of M/s NNCCPL falls within the ambit of Rule 3 of Place of Provision Rules, 2012, according to which location of service recipient is relevant. Foreign universities the service recipient, are located outside the taxable territory. Therefore place of provision of impugned Foreign Consultancy Service is outside the taxable territory. Accordingly, the show cause notice has wrongly invoked Rule 9 of Place of Provision Rules. Demand confirmed invoking said rule is therefore, liable to be set aside. The issue is otherwise no more res integra as being already dealt with by this Tribunal Principal bench in the case of M/S CHF INDUSTRIES INDIA (P) LTD. VERSUS COMMISSIONER, CENTRAL GOODS AND SERVICE TAX, NOIDA 2021 (10) TMI 641 - CESTAT ALLAHABAD , MACQUARIE GLOBAL SERVICES PVT LTD VERSUS COMMISSIONER OF CE ST, GURGAON-I 2021 (12) TMI 481 - CESTAT CHANDIGARH and M/S. R.S. GRANITE MACHINE TOOLS PVT. LTD. VERSUS THE COMMISSIONER OF GST CE (CHENNAI-NORTH) 2019 (1) TMI 1179 - CESTAT CHENNAI . Extended period of limitation - HELD THAT - In present case, NNCCPL has been registered with the Service Tax department and has been filing its service tax returns regularly. Payment of Service Tax as applicable on them has clearly been discharged by them vis- -vis domestic consultancy Income and Coaching Services. The appellant is held not liable to pay service tax with reference to foreign Consultancy Income i.e. the income received from foreign universities for promoting and publicizing their business in India. There is no evasion of tax, question of having any intent to evade is redundant when the tax is already paid. Thus the show cause notice is barred by time. The appellants are wrongly held as intermedia in terms of Rule 2(f) of Place of Provision Rules, 2012. The services rendered amounts to Export of Service in terms of Rule 6A of Service Tax Rules. Hence Rule 9 of Place of Provision Rules has wrongly been invoked. Appellant is, therefore, not liable to pay service tax on foreign Consultancy fee. The show cause notice is otherwise held to be barred by time - the order under challenge is set aside and the appeal is hereby allowed.

Summary

Issues Involved:

1. Whether the services rendered by the appellant to overseas universities/colleges amount to 'Export of Service' or 'Intermediary Service'.
2. Application of Rule 9 versus Rule 3 of the Place of Provision of Services Rules, 2012.
3. Eligibility for exemption under Notification No. 25/2012-ST.
4. Invocation of the extended period of limitation for issuing the Show Cause Notice.

Detailed Analysis:

1. Export of Service vs. Intermediary Service:
The primary issue was whether the appellant's services to foreign universities amounted to 'Export of Service' or were classified as 'Intermediary Service'. The tribunal examined the agreements between the appellant and foreign universities, noting that the appellant was not an agent or broker for these universities. The appellant's role was to promote and publicize the courses offered by foreign universities, and the agreements explicitly denied any agent-principal relationship. The tribunal concluded that the appellant was not providing intermediary services but rather direct services to the foreign universities, which qualified as 'Export of Service'. This classification exempted the appellant from service tax under Rule 6A of the Service Tax Rules, 1994.

2. Application of Rule 9 vs. Rule 3:
The department applied Rule 9, assuming the appellant provided intermediary services, making the location of the service provider (India) relevant for taxability. However, the tribunal held that Rule 3 was applicable, as the services were provided to foreign universities located outside India. The tribunal emphasized that the location of the service recipient (foreign universities) was crucial, and since they were outside the taxable territory, the services were considered exports.

3. Exemption under Notification No. 25/2012-ST:
The appellant argued that their services were exempt under Notification No. 25/2012-ST, which exempts auxiliary educational services. The tribunal found that the appellant's services were indeed auxiliary to education, as they involved promoting and facilitating awareness of foreign university courses among Indian students. Therefore, the services were eligible for exemption under the notification.

4. Extended Period of Limitation:
The tribunal examined whether the extended period of limitation was rightly invoked. It was noted that the appellant had been regularly filing service tax returns and paying applicable taxes on domestic consultancy and coaching services. The tribunal found no evidence of willful misstatement or suppression of facts by the appellant. Consequently, the invocation of the extended period was deemed unjustified, rendering the show cause notice time-barred.

Conclusion:
The tribunal concluded that the appellant's services were wrongly classified as intermediary services. Instead, they amounted to 'Export of Service', exempt from service tax. The application of Rule 9 was incorrect, and the services fell under Rule 3, with the recipient located outside India. The exemption under Notification No. 25/2012-ST was applicable, and the extended period for issuing the show cause notice was improperly invoked. The tribunal set aside the order under challenge and allowed the appeal.