Export of Service - Commission Received (Business Auxiliary Service) - receipt in foreign currency is not required to claim the benefit of exemption

In recent judgment (2009 -TMI - 33500 - CESTAT NEW DELHI), Tribunal has said that for the purpose of services mentioned in rule 3(3) of Export of service rules, 2005, there is no requirement of receipt of foreign exchange.

Facts of the Case:

For procuring the orders/contracts from Railways for GMC, the Appellant received a commission on which the service tax was paid by them. The commission, however, was not received directly from GMC but was received through Indian Railways in Indian currency as per understanding between GMC and Indian Railways, the GMC received payment from Indian Railways after deducting the commission payable to the Appellant, which was paid by the Railways to the Appellant in Indian rupees.

The Appellant claiming that the services provided by them to GMC, on which service tax had been paid during April'05 to June'05 period, are service exports under Export of Service Rules, 2005, filed a refund claim for service tax amounting to Rs. 2,05,489/-

The Asstt. Commissioner and Commissioner (Appeals) rejected the claim of the assessee.

Findings and Decision:

The service provided by the Appellant to GMC is taxable under Section 65(105)(zzb) of the Finance Act,1994 and this service is covered by sub-rule 3 of Rule 3, as there is no dispute about the fact that it has been provided in relation to the business of the recipient, located outside India.

The Deptt.'s contention is that since the payment for the service has been received in Indian currency from Railways, in view of the proviso to sub-rule (3), this cannot be treated as service export. However, the proviso is applicable only if the service recipient have any commercial or industrial establishment or any office relating thereto, in India, and only in such a situation conditions enumerated mentioned in clause (a)(b) & (c) have to be satisfied. In this case, it is not the case of the Deptt. that GMC, USA have any office of commercial or industrial establishment in India. Therefore, the proviso to sub-rule 3 and the conditions (a), (b) and (c) enumerated therein are not applicable.

We find that the Tribunal, in the Appellant's own case, reported in 2008 -TMI - 30038 - CESTAT, NEW DELHI. has held that just because commission was received by the Appellant through Indian Railways in Indian Rupees as Indian Railways made payment to GMC in foreign currency after deducting the commission payable to GMC, it cannot be said that the service provided by the Appellant to GMC, USA is not export of service. In the case of ETA Travel Agency Pvt. Ltd. (supra) cited by Ld. DR. the off shore service receiver had an office in India and the commission had been received from the bank account of such local office of the off shore service receiver and in view of the facts of the case, the Tribunal held that the service has been provided and received in India and it was not a case of export of service. Therefore, this judgment of the Tribunal is not applicable to the facts of this case.

We, therefore, hold that the service provided by the Appellant to GMC, USA has to be treated as 'export of service' under Rule 3(3) of the Export of Service Rules and therefore, the terms of the provisions of Rule 5 ibid, the Appellants were eligible for refund of the service tax paid on such service exported to GMC, USA.

NATIONAL ENGG. IND. LTD. Versus CCE, JAIPUR [2009 -TMI - 33500 - CESTAT NEW DELHI]

Also see: Rule 3 of Export of Services Rules, 2005 (As amended - old and new provisions)