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TMI Blog2009 (8) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... llant of money transfer is directly to Western Union. If that be so, it can be said that the appellant is providing the services to Western Union whose beneficiaries are outside India. – Benefits of service accrue to person outside India - We find strong forces in the contentions raised by the ld. Counsel that the issue is now squarely covered in favour of the assessee by the decision of this Bench in the case of Nipuna Services Ltd. V. CCE&ST, Hyderabad [2009 - TMI - 33480 - CESTAT BANGLORE]. - Accordingly, we are of the considered view that services rendered appellant cannot be taxed under the category of ‘business auxiliary services’ - ST/493 and 298/2008 - 1115-1116/2009 - Dated:- 18-8-2009 - S/Shri M.V. Ravindran, Member (J) and P. Karthikeyan, Member (T) S/Shri Siddarth Srivastava and G. Shivadass, Advo cates,for the Appellant. Shri U. Raja Rain, JDR,for the Respondent. [Order per: M.V. Ravindran, Member (J)]. - These two appeals are directed against the OLA No. 108 dt. 30-5-2008. The relevant fads that arise for consideration are:- 2. The appellants are non-banking financial company with wide net work of branches spanning across Kerala, Tamilnadu, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-agent does not represent the agent. The Appellants place reliance on the following facts and Clauses in the Agreement between Weizmann and the Appellants to prove that the Appellants while acting as a sub agent are providing services to Principal, Western Union, only: * The service requirements and the software for providing the money transfer service is prescribed and provided by Western Union to all its representatives and sub-representatives. * As per Clause 2.7 the appellant holds all monies in trust for Western Union at all times. * As per Clause 5.1 the appellant shall use its best efforts to advertise and promote the Money Transfer Service so as to promote public interest and confidence both in the Money Transfer Service and Western Union. * As per Clause 5.3 the appellant has also to obtain the prior written consent of Western Union to use any other promotional materials other than those provided to them. * As per Clause 7.3 the appellant has to install versions of software on the terminals at each of the locations as released by Western Union from time to time. * As per Clause 8.2 Western Union has access to the records maintained by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking company or a financial in situation including a non banking financial company or any other body corporate or any other person, namely:- (ix) Other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange; transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults, operation of bank accounts [supplied] Taxable Service is defined under Section 65(105)(zm) of the Act as any service provided or to be provided to a customer by a banking company or a financial institution including a non-banking financial company, in relation to banking and other financial services. The CEEC circular dated 28-2-2006 clearly specifies that the scope of the banking and other financial services was extended specifically to include money transfer service thus clarifying that the service was not taxable prior to that date. Thus Transfer of money including telegraphic transfer, mail transfer and electronic transfer became a taxable service for the first time with effect from 1-5-2006. The appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provided in relation to business or commerce; (b) Service must be provided to a recipient located outside India; (c) Service is provided from India; (d) Service is used outside India; and (e) Payment for such service is received by the service provider in convertible foreign exchange. In the present case there is no dispute regarding the fulfillment of conditions as mentioned in (a), (b) and (c) as indicated above. The only dispute that can arise will be in respect of condition no. (d) and (e) wherein it has to be satisfied that the services have been used outside India and payment for such service is received by the service provider in convertible foreign exchange. As regards condition (d) regarding use of service is concerned the Appellant relies on CBEC Circular No. ul dated 24th February, 2009, which clarified the meaning of the phrase used outside India as follows: Sub-rule (1) of Rule 3 of the Export of Services Rule, 2005 categorizes the services into three categories: (iii) Category (III) [Rule 3(1)(iii)] : For the remaining services (that would not fall under category I or II) which would generally include knowledge or technique based services, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. National Engineering India Limited v. CCE, Jaipur reported - 2009 (15) S.T.R. 68 (Tri.-Del.) = 2009-TIOL-523-CESTAT-DEL. Hence, even though the commission for acting as a sub-agent is received by the Appellant, acting as a sub agent, in Indian currency from the Principal agent M/s. Weizmann, since the services by both Appellants and Weizmann were provided to a common principal M Western Union, it will qualify to be treated as an export of service. The Appellant can be considered as rendering banking and financial ser vice to customer in India. Since no consideration is received from customer in India for providing the money transfer service. The only consideration is received from the customer abroad and therefore the service will amount to export of service. D. Appellants undertake the activity as sub contractor which is not liable to Service tax The Appellants submits that it is clear from the agreement on record that they are working as sub-agents of Weizmann in India. The Appellants submit that the Commissioner of Central Excise, New Delhi vide Trade Notice dated 11-6-1997 has clarified that when CHAs sub con tract their work and if the CHA pays serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the provisions of the law and not because of any intentional avoidance of tax. The Appellants rely on the following decisions: * NRC Ltd. v. CCE, Thane-I - 2007 (5) S.T.R. 308 (Tri.-Mumbai) = 2007 (209) E.L.T. 22 (Tribunal). * Universal Cables Ltd. v. CCL, Bhopal - 2007 (7) S.T.R. 310 (Tri.-Del.) The longer period of limitation can be invoked only in cases where there is fraud, willful misstatement, collusion or suppression of facts with intent to evade tax. In the present case the Appellant did not willfully suppress any fact and there was no failure to disclose fully or truly the material facts. The Appellants are still of the bona file belief that tax is not payable on money transfer ser vices under business auxiliary services. In such a scenario extended period can not be invoked in this regard reliance is placed on the following decisions: * Padmini Products Limited v. CCE - 1989 (43) E.L.T. 195 (S.C.) CCE v. Chemphar Drugs and Liniments - 1989 (40) E.L.T. 276 (S.C.) In view of the above arguments that extended period cannot be invoked and the entire demand is time barred and tenable to be set aside. F. Penalty and interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is WFL. He would submit that the services rendered by the appellant are only to WFL and they are also in India. The entire agreement does not say that the appellant is providing services to Western Union. He would submit that both the lower authorities have correctly come to the conclusion and there is no reasons for setting aside such findings. He would reiterate the findings recorded by the ld. Commissioner (Appeals). 6. We have considered the submissions made at length by both sides and perused records. The issue to be decided in this case is whether the services rendered by the appellant would be covered under the category of business auxiliary services and whether the appellant provides customer care services on be half of the client. 7. First and foremost, thing which needs to be addressed in this case is the sub-representation agreement entered between the appellant and WFL. The specific c1auses which requires consideration are reproduced below:- 2. Offering the Money Transfer Service 2.1 Compliance with agreement The Sub-representative shall at all times offer the Money Transfer Service in accordance with the terms and conditions of this agreement. 2.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny time visit the Sub-representative's locations for the purpose of auditing the Sub-representative's compliance with the terms of this Agreement, including, without limitation, the Sub-representative's compliance with all laws, regulations and policies intended to detect and prevent money laundering and other illicit, improper or illegal transfers or payments of funds 3.... 4.... 5. Advertising and promotion 5.1 Promotion of the Money Transfer Service:- The Sub-representative shall use its best efforts to advertise and promote the Money Transfer Ser vice so as to promote public interest and confidence in both the Money Transfer Service and Western Union. 5.2 Promotional Materials:- The Company shall provide the Sub- representative with Promotional Materials for use in connection with the marketing of the Money Transfer Service. 5.3 Use of Promotional Materials:- The Sub-representative shall use the Promotional Materials provided by the Company in prominent exterior and interior locations as appropriate. The Sub-representative shall not use any other advertising or promotional material (including its own advertising or promotional material) except with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction then the Company will have the right to terminate or suspend this agreement immediately and Western Union will have the right immediately to take any action in order to prevent the Sub-representative from continuing to offer the Money Transfer Service. (c) This agreement shall continue in force after the Initial Term for one or more Successive Terms unless the agreement is terminated by the Company or the Sub-representative giving notice in writing to the other party not less than 90 days prior to the end of the Initial Term or any Successive Term as relevant. (d) This agreement terminates automatically upon termination for any reason of the Western Union Representation Agreement. (e) The Company or Western Union will have the right to terminate this agreement upon no less than 30 days, notice to Sub-representative upon any change in control or ownership of Sub-representative or upon the commencement against Sub-representative of any proceedings relating to bankruptcy, insolvency, liquidation or similar proceedings. 14.3 Post-Termination obligations:- Following Termination, the Sub- representative shall: (a) promptly render a full accounting to the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representation agreement, though the sub-representation agreement is entered between WFL and the appellant, clauses 5, 14 and 15, very clearly indicate the ultimate beneficiary of the entire transaction is Western Union. It is undisputed in this case, that a person approaches Western Union situated outside India for transfer of fund to a beneficiary in India i.e. A person pays money in England to be given to his relative in India, the appellant herein by virtue of sub- representation agreement, arranges to delivery the said money to the beneficiary on verification of identity. It is undisputed that the appellant herein does not charge any amount as commission or fee from the recipients of the amount. The said Western Union charges fee from the person who is situated outside India and pays WFL some amount as commission and WFL pay current appellant a part of the amount as compensation. In the whole transaction it can be seen that the services rendered by the appellant of money transfer is directly to Western Union. If that be so, it can be said that the appellant is providing the services to Western Union whose beneficiaries are outside India. 9. We find that the CBEC vide its ..... 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