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TMI Blog2011 (9) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation. Difference of opinion - Matter referred to larger bench. - ST/311 of 2009, 285 of 2009, 833-837, & 652 of 2008, 14 of 2009, 423 of 2009, 206 of 2010, 224 of 2010, 230 of 2010, 10 of 2009, 520 of 2010, 20 of 2009, 107 of 2010, 240-241 of 2008, 274-278 of 2010, 298 of 2010 with COD No.75 of 2010, 300 of 2010, - - - Dated:- 29-9-2011 - Shri D.N. Panda, Shri Mathew John, JJ. Appearance: Appeared for Appellant : Sh. Joseph Vallaypally, Sr. Advocate, Sh.S. Malhotra, Advocate, Sh. Regvesh Singh Sh. Rajesh Chhibber, Advocates Appeared for Respondent : Sh. Sumit Kumar Sh. B.L. Soni, SDRs Appeared for Appellant : Shri Atul Khullar, Advocate Appeared for Respondent : Shri Sumit Kumar, SDR Sh. B.L. Soni, SDR Appearance: Appeared for Appellant : Sh. Joseph Vallaypally, Sr. Advocate, Sh.S. Malhotra, Advocate, Sh. Regvesh Singh Sh. Rajesh Chhibber, Advocates Appeared for Respondent : Sh. Sumit Kumar Sh. B.L. Soni, SDRs Appearance: Appeared for Appellant : Sh. Rajesh Chhibber, Advocate Appeared for Respondent : Sh. B.L. Soni, SDR Appearance: Appeared for Appellant : Shri S. Malhotra, Advocate Appeared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal is in relation to remittance from persons abroad to persons in India. This statement is not contradicted by Revenue. In this business the person located abroad approaches any of the offices of the Western Union or its agents and give money to be remitted to a person in India. The office abroad charges the person abroad commission for remitting money to India. They convert the foreign exchange into Indian rupees and pay the recipient in India following a system to ensure the identity of the person to whom the money is delivered. No charges are levied from the recipient of money in India. PML gets their remuneration from Western Union by sharing the commission collected from the person abroad. They also make some profits due to changes in exchange rate between the date of receipt of money abroad and date of delivery of equivalent Indian Rupees in India. However this profit is subject to the risk of loss if the exchange rate changes adversely for the Western Union and its agents. 4. PML does some promotional activities like advertising, organizing promotional programs, distributing promotional material etc. The amount incurred by PML for promotional activities w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng it for the entire period ignoring different laws in existence for different periods. (iv) The demand is time barred because the entire matter arises out of different interpretations of law and not on account of any suppression on the part of PML and hence extended period cannot be invoked. (v) There is no such demand issued to various banks which were doing the same service during the relevant period. (vi) No tax has been demanded for services prior to the period specified in the SCN and for period after the period specified in the SCN. The nature of service has remained the same. The laws have changed only marginally by way of some clarificatory amendments. Since no tax is being demanded for the current period it is obvious that Revenue is conceding that the service in question is exported. Classification of the service during the relevant period 8. As already explained the argument of PML is that their activity is specifically covered under Banking and Financial Services w.e.f 01-05-2006 consequent to amendment carried out by Finance Act, 2006. Since the intrinsic nature of the service is that of Banking and Financial Service and it was not covered till 01-05-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in this regard which rules came into force on 15.3.2005. So from 15-3-2005 the matter is to be tested in terms of the rules laid down in the said Rules and not according to the varying opinions of individuals. The period under dispute starts from 01-07-2003. So there is some dispute as to what should be the criteria to be adopted for the period prior to 15-03-2005. In fact one of the major contentions of the PML is that the case has been adjudicated without considering different laws that existed for different parts of the period in question. It is also relevant to note that after 15-03-2005 there have been few amendments in Export of Services Rules, 2005. So even after 15-03-2005 the issue may have to be examined for different periods. 13. After hearing both sides at length on the issue whether the service is exported or not, it is seen the contrast in the arguments on both sides is as under: (i) PML argues that it is providing services to Western Union situated abroad with whom PML is having a contract for providing services and PML gets its remuneration from Western Union. Further the ultimate beneficiary of the service is the person situated abroad who approaches the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. So is the case of Banking and Financial Service defined at section 65(105) (zm). There are additional conditions which need to be examined. There is also the complication that these additional conditions were changed from time to time during the disputed period. 15. In the matter of services rendered by intermediaries like that of a stock broker, commission agent, insurance agent etc there are two sets of beneficiaries of the activity of the intermediary. In the case of a stock broker the buyer and seller of the stock are beneficiaries. In the case of a commission agent also the buyer and seller are beneficiaries. In the case of insurance policy, the insurer and the insured are beneficiaries. In the scheme of service tax levy, there is tax only if any remuneration is received by the person providing service. In the case of stock broker, commission is paid by both the buyer and the seller and both the commissions are subject to tax. In the case of insurance policy only the insurer pays commission and not the insured. The commission paid by the insurer is subject to tax. In the case of impugned service the recipient of money in India is not paying any commission. So we are cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of the provisions of the Export of Services Rules, 2005 in certain situations In terms of rule 3 (2) (a) of the Export of Services Rules 2005, a taxable service shall be treated as export of service if 'such service is provided from India and used outside India' Instances have come to notice that certain activities, illustrations of which are given below, are denied the benefit of export of services and the refund of service tax under rule 5 of the Cenvat Credit Rules, 2004 [notification No. 5/2006-CE (NT) dated 14.03.2006] on the ground that these activities do not satisfy the condition 'used outside India',- (i) Call centres engaged by foreign companies who attend to calls from customers or prospective customers from all around the world including from India; (ii) Medical transcription where the case history of a patient as dictated by the doctor abroad is typed out in India and forwarded back to him; (iii) Indian agents who undertake marketing in India of goods of a foreign seller. In this case, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign exchange; (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view, the meaning of the term 'used outside India' has to be understood in the context of the characteristics of a particular category of service as mentioned in sub-rule (1) of rule 3. For example, under Architect service (a Category I service [Rule 3(1)(i)]), even if an Indian architect prepares a design sitting in India for a property located in U.K. and hands it over to the owner of such property having his business and residence in India, it would have to be presumed that service has been used outside India. Similarly, if an Indian event manager (a Category II service [Rule 3(1)(ii)]) arranges a seminar for an Indian company in U.K. the service has to be treated to have been used outside India because the place of performance is U.K. even though the benefit of such a seminar may flow back to the employees serving the company in India. For the services that fall under Category III [Rule 3(1)(iii)], the relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for Category III services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t feels that these clarifications are not in conformity with the Rules and legal principles at large because service tax is a destination based consumption tax as held by the Honourable Supreme Court in All India Federation of Tax Practitioners Vs. UOI-2007 (7) STR 625(SC) and the service is consumed in India and the service is terminated in India according to his perception. (This perception needs testing against the fundamental postulate that the taxable part of the service provided by the service provider to the two parties and payment in consideration flows in opposite directions, so long as there is nothing artificial about the funds flow). At any rate the Ld. SDR has serious reservation in applying these clarifications issued in 2009 and 2010 to a dispute for the period 2003 to 2007. Even with the clarification he has an argument because he does not agree that benefits of these services accrue outside India . The matter has also been decided by the Bangalore Bench of the Tribunal in Muthoot Fincorp Ltd Vs. CCE Vishakhapatanam-2010 (17) STR 303. But the Ld. SDR has serious reservations in accepting this decision. He argues that this decision relies on the decision of Nip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed if,- (i) such taxable services which are provided and used in or in relation to commerce or industry and the recipient of such services is located outside India: Provided that if such recipient has any commercial or industrial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of services only if- (a) order for provision of such service is made by the recipient of such service from any of his commercial or industrial establishment or any office located outside India; (b) service so ordered is delivered outside India and used in business outside India; and (c) payment for such service provided is received by the service provider in convertible foreign exchange; (ii) such taxable services which are provided and used, other than in or in relation to commerce or industry, if the recipient of the taxable service is located outside India at the time when such services are received. Explanation .- For the purposes of this rule 'India' includes the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir business outside India. Revenue argues that the service is utilized in the business of Western Union in India, because all the activities of PML are carried out in India. Here it is to be noted that Revenue is equating 'used' with 'performed' though they are directly not stating so. After having used the word 'performed' in Rule 3(1) (iii) of Export Rules, if the same word is not used and a different word is used in Rule 3 (1) (iii) it is obvious that the words are not interchangeable. Further as already explained PML is getting their payment from Western Union located abroad and it is very obvious that the service is used by the person making the payment and not the recipient of money in India who does not make any payment. The Western Union is getting their payment from the person remitting money abroad and hence obviously the services rendered by PML is ultimately used by the person remitting the money from abroad. So we come to the conclusion that the impugned service is used outside India and would qualify as export of services as per conditions laid down in Rule 3 (1) (iii) of Export of Services Rules, 2005. These arguments are equally applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Muthoot Fincorp Ltd. v. CCE Vizag-2010 (17) S.T.R. 303 23.3 Instead we have given more elaborate arguments to reaffirm the finding in the above decisions with the hope that it will clear up the cob-web in the ideas relating to the issue of export of services and will help in deciding such disputes in future. 23.4 There are difficulties in defining what constitutes export of service. Law in this regard has to evolve based on internationally accepted principles. GOI is taking adequate steps in this regard by making clarificatory amendments in laws. The case laws in this regard also are evolving in a consistent direction. The consistent progress in one direction cannot be reversed to support the enthusiasm of Revenue to book one or two cases involving a few crores. If the Revenue has a case that the Rules are not resulting in a desired outcome, the proper course is to amend the rules rather than selectively book cases a few persons canvassing a particular interpretation of rules. Such an approach very essential of achieve better certainty of tax incidence and reduce business risk of unexpected tax demands which surface suddenly lone after the events. 25. The Appellant succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the services that are being exported no service tax would be leviable on such secondary services. However in case where the secondary service gets consumed in part or toto for providing service in India, the service tax would be leviable on the secondary service provider. For this purpose both primary and secondary service providers would maintain the records deemed fit by them to identify the secondary services with services that are being exported. 31. The Counsel further points out that these assessees had taken the plea that the service was classifiable as Banking and Financial service at the First Appellate stage unlike PML which has raised the plea for the first time before the Tribunal. Further it is pointed out that in the case of the assesse in Appeal No. ST-834/2008, the demand itself was made under Banking and Financial service. The order-in-appeal records that they were contesting that they were acting as 'foreign commission agents' and were exempt from payment of tax. The assessee also has an argument that it is eligible for the exemption for small service providers in Notification 13/2005-ST. 32. In reply the Ld SDR submits that the assessee did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so pleads the ground of limitation and draws attention specifically to the letter written by the Superintendent. Appeal ST-285/2009 filed by Banwari Trading Company 38. This Appellant is a sub-agent who acts on behalf of Moneygram instead of Western Union. But the nature of activity remains the same. This Appellant adopts the arguments given by PML. This Appellant also pleads that it is eligible for Small Scale exemption. Appeal ST/520/2010 filed by Novelty Finance 39. Apart from adopting all the arguments of the other counsels in the matter of export of the service, this Appellant argues that he is doing business support service. He argues that Business Support Services is taxable from 01-05-2006 only. He relies on the orders passed by Commissioner (Appeal) Chandigarh in matters relating to M/s Ramble Consumer Services Patiala and M/s Jolly Enterprises Patiala. The Counsel also relies on para 4 of CBEC's circular 56/5/2003 ST dated 25-04-03. This para reads as under: 4. Another question raised is about the taxability of secondary services which are used by the primary service provider for the export of services, Since the secondary services ultimately gets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record, dominant object of terms of contract between parties, law relating to Service Tax laid down by Apex Court, rules of classification of taxable service, constitutional provision relating to export, applicability of theory of equivalence to service tax law and law laid down by Apex Court in respect of export, calling for different decision. I felt it necessary to record my separate decision and reason for the same hereunder, respectfully disagreeing with the reasons of decision and decision recorded by my learned brother. 44.1 In this batch of appeal both assessees and Revenue is in appeal. While some assessees are Representatives of foreign principal to provide money transfer service India on behalf of the foreign principal, in some cases they are sub-representatives of the Representative and following questions were raised in this batch of appeals for answering: (1). Whether the activity of delivery of money in India by representatives and sub-representatives (in India) for a consideration, on behalf of their foreign principal transferring such money from abroad, is business auxiliary service and taxable u/s 65 (zzb) read with section 65 (19) of Finance Act, 1994? An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry thereof in India on its behalf by its representatives and sub-representatives in India for a consideration in terms of certain agreed terms and advertisements as well as publicity was made for a consideration by such representatives and sub-representatives to sub-serve as well as advance the object of money transfer. In order to answer the questions arose as aforesaid, the law relating to levy of service tax and meaning of export, law relating thereto is necessary to be dealt first LAW OF SERVICE TAX FOLLOWS PRINCIPLE OF EQUIVALENCE AND IS A VALUE ADDED DESTINATION BASED CONCUMPTION TAX 45. In para 22 of the judgment in Association of Leasing Financial Service Companies Vs. Union of India - 2010 (20) STR. 417 (S.C.), Apex Court reiterated jurisprudence of service tax in following terms: In All India Federation of Tax Practiti0ners' case (supra), this Court explained the concept of service tax and he/d that service tax is a Value Added Tax ( VAT for short) which in turn. is a destination based consumption tax in the sense that it is levied on commercial activities and it is not a charge on the business but on the consumer. That, service tax is an economic concept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f services as both satisfy the human needs (para-4 of the Judgment). In para 6 and 7 the Hon'ble Court held as under : 6. At this stage, we may refer to the concept of Value Added Tax (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer 7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax . [Emphasis supplied] 45.2 While dealing with meaning of service tax Hon'ble Court in Para 17 to 20 held as under : 17. As stated above, the source of the concept of service V tax lies in economics. It is an economic concept. It has evolved on account of Service Industry becoming a major contributor to the GDP of an economy, particularly knowledge-based economy. With the enactment of Finance Act, 1994, the Central Government derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured would mean that the goods produced must satisfy the test of saleabiity/marketability. The reason being that the duty under the 1944 Act is on manufacture/production but the manufacture/production is intended for taking such goods to the market for sale. It was observed that the obvious reason for levying excise duty linked with production or manufacture is that the goods so produced must be a distinct commodity known in the market. We quote herein below para 7 of the said judgment, which is as follows: The duty of excise being on production and manufacture which means bringing out a new commodity, it is implicit that such goods must be useable, moveable, saleable and marketable. The duty is on manufacture or production but the production or manufacture is carried on for taking such goods to the market for sale. The obvious rationale for levying excise duty linking it with production or manufacture is that the goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for purposes of buying and selling. Since the solution that was produced could not be used as such without any further processing or application of heat or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th a general tax as well as destination based consumption tax leviable on services provided within the country . (Emphasis supplied) 45.3 Applying the principle of equivalence as has been laid down aforesaid by Apex Court, which is inbullt into the concept of service tax under the Finance Act, 1994, there is no difference between production or manufacture of saleable goods and production of marketable/saleable services in the form of an activity undertaken by the service provider for consideration, which correspondingly stands consumed by the service receiver. It follows that service tax being a i tax on an activity is also destination based value added tax. There is no ambiguity that taxable service provided in India is meant to be taxed under the provision of finance Act 1994. through different clauses, number of taxable service entries are spread over section 65(105) of the said Act. Terms and expressions used in these clauses are defined by various subsections of section 65 of that Act. MEANING OF EXPORT AND EXISTENCE OF TWO TERMINI IS PREREQUISITE FOR EXPORT OF SERVICE 46 Material facts, Agreements and recorded statement as well as modus operandi of the Assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the Finance Act, 1994 which is not dominant object of the contract since even sender may also seek confirmation from the receiver of money for his satisfaction. Thus intimation of payment to the foreign principal is not decisive of the nature of money transfer to be export of service when dominant object is to deliver money so as to is to terminate the money transfer service in India. 46.2 In the present cases, India is the destination for providing money transfer service traveled from outside India for ultimate consumption and termination in India. Once the money given by the sender thereof to the foreign principal for transfer to India export of C service occasions from abroad for its termination in India without sl/L . .further transfer of the said money by export to abroad. The position of law as laid down by Apex Court in the decision of Burmah Shell Oil Storage and Distributing Co. of India Ltd. and Another v. Commercial Tax Officer and Others - (1960) 11 STC 764 (SC) is that in respect of export of goods all exports involve a taking out of the country. Such principle equally applies to taxable service provided following principle of equivalence. Just like the tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer in that case which is similar to the activity of assessees. Principle of equivalence as has been held by Apex Court in the case of All India Fedn. of Tax Practitioners v. UOI - 2007 (7) STR 625 (S.C.). Constitutional provision and law laid down in aforesaid judgments of Apex Court relating to export has not received attention of the Bench while passing order. Therefore such decision shall not be profitable to the assessees. 46.6 The circulars issued by Board subscribe to the concept of export under Constitution and appears to have clear perception about such concept from the experience gained under Customs and Excise law in this country. Those Circulars call for reading in the analogy and spirit of basic concept of export explained as aforesaid by Apex Court without being misconstrued. This is clear from the context of different circulars issued by Board from time to time and Export Rules framed. Those Circulars also imply that when ultimate outcome of taxable service is consumed in India and extinct in India that does not have any utility for export from India in the same structure and nature as that was originated in abroad and traveled from that place. The money tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in India. Accordingly, export of service plea of the Assessee is inconceivable and liable to be rejected when money transfer service is meant by foreign principal to come to an end in India upon delivery thereof on his behalf in India. Material facts of the cases also make it clear that the impugned services were meant to reach the consumers of Indian Territory and to exhaust here upon provision. End users of service being in India, foreign principals intended that money transferred from abroad should be delivered on their behalf in India without further export of such money to abroad. Intimation of delivery of money in India is not attempted to be taxed in the present cases. Therefore law is not concerned with that to color the money transfer service to be export of service. No money transfer service having moved out of India to a place out side India in terms of representation agreement, plea of export of service is untenable. MARKET PROMOTION - SUBSERVIENT TO MONEY TRANSFER SERVICE 47 It may be appreciated that in terms of the agreements, the Assessee Representative and sub-representatives in India made advertisement and publicity to promote money transfer service me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts itself, we are not recording our finding on other submissions made by both sides . 50. What is called banking and other financial services has been explained by Apex Court in Para 16 to 21 of the judgment in the case of Association of Leasing and other Financial Services - 2010 (20) STR 417 (SC). Meaning of Banking is given by Indian Banking Regulations Act, 1949 and country s monetary and banking system is regulated by Reserve Bank of India constituted under Reserve Bank of India Act, 1934. Financial services are like equipment leasing, extending hire purchase facilities and project financing etc. come under financial services. Non-Banking financial Companies (NBFC) A governed by RBI Act, 1934 undertakes financial services subject to control under RBI Regulations. 51. In this batch of appeals we were given to understand that none of the assessees are NBFCs whereas Muthoot Fincorp Ltd was a NBFC. When these NBFCs and other commercial concerns gradually entered into money transfer activity, legislature also brought money transfer activity under the scope of Banking and other financial services to expand tax base bringing the entities defined by section 65(12) of Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evasion. So also being registered when assessees do not disclose the transactions in the statutory returns and make false declaration therein that keep revenue in dark and deprives it to realize its legitimate dues. Intention to evade plays a vital role to invoke extended period of limitation and also levy of penalty. Therefore each and every case is to be decided on the facts of the respective case, statutory provisions, law laid down in various judicial pronouncements and guide lines stated above. INCOME TAX BENEFIT 54. Where there is claim of cum-tax benefit, such benefit may be extended subject to provision contained in law relating to determination of assessable value under Finance Act, 1994 and also following law laid down in Amrit Agros V. CCE - 2007 (210) ELT 183 (SC) depending on the facts of each case. SMALL TAX PAYER S BENEFIT 55. Plea of small tax payer's benefit may be extended subject to scrutiny of facts and law applicable to the appropriate case to avoid hardship to the small tax payers. DEDUCTIONS RELATING TO PAYMENT MADE TO SUB- REPRESENTATIVES 56. Cases where deduction is claimed towards payment made by Representatives to the sub-r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia on behalf of foreign principal for the period 01.07.2003 to 30.6.2007 (Ref: Para 16 17 of SCN). GOVERNING TERMS OF AGREEMEN 59.3. The allegation in the SCN dated 8.2.2008 was examined in Adjudication made by order dated 3.2.2009. Agreements dated 27.4.98 and 26.1.07 executed by M/s Paul Merchants Ltd. with Western Union exhibiting understanding of the parties revealed by para 4 of the Show Cause Notice in page 1 to 5 thereof were also examined 59.4 Governing terms of representation agreement dated 27.4.1998 as is clear from para 4 of that agreement reads as under:- A. Representative shall advertise and promote the Service in India at its own expense in such manner as to successfully develop the market for the Service and to promote customer interest in the Service. Representative agrees to meet or exceed the advertising and promotion program set forth in Exhibit B attached hereto and spending commitment specified in Exhibit B. All of representatives advertising and promotional material must be submitted by li' representative to Western Union for written approval prior to use. Western Union will furnish specifications for all signage and will provide at no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and other areas to which the transfer of funds is likely to occur. 2.3 If REPRESENTATIVE wishes to engage sub-representatives to provide Money Transfer Services in the Territory and if the laws of the Territory permit the performance of the Money Transfer Services by the sub-representatives and if WESTERN UNION approves REPRESENTATIVES engagement of sub-representatives, then REPRESENTATIVE will execute WESTERN UNION% standard Rider to the Representation Agreement for the engagement of sub-representatives. REPRESENTATIVE must provide WESTERN UNION with true and complete copies of all contracts and other agreements to be entered into between REPRESENTATIVE and any proposed sub-representative, and no proposed sub-representative may begin offering the WESTERN UNION service until WESTERN UNION has approved such documents. REPRESENTATIVE will provide WESTERN UNION with all other information that WESTERN UNION may from time to time request about such sub- representative and its proposed relationship with REPRESENTATIVE including but not limited to the locations of all sub-representative premises where the Money Transfer Service will be provided and information about the sub-represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pient or by WESTERN UNION. 2.8 REPRESENTATAIVE agrees at its expenses to establish and maintain a customer service center operating 24 hours a day, 365 days a year to respond to inquiries from the general public about the Money Transfer Service. In this connection REPRESENTATIVE shall establish and maintain one or more 24 hour toll-free telephone numbers for Recipients and other members of the general public to call for information about Money Transfer Services and REPRESENTATIVE Locations. The tol/-free telephone numbers shall be listed under Western Union Money Transfer REPRESENTATIVE Name. In all local telephone directories and any other listings deemed appropriate by REPRESENTATIVE and WESTERN UNION. All such listings shall be transferred to WESTERN UNION at WESTERN UNIONS request or if this Agreement is terminated with REPRESENTATIVE remaining responsible for all costs and charges incurred prior to the date of any such transfer. 2.9 REPRESENTATIVE shall operate its customer service center in compliance with service standards that WESTERN UNION establishes from time to time. Such service standards shall comprise part of the Service Requirements. The service standards sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m such of Representatives outlets that are approved in advance by Western Union writing and shall arrange for the provision of the service by sub-representatives appointed by Representative with the prior written approval of Western Union for each such sub- representative and sub-representative location in such manner as to successfully develop the market for the service to within and from India. Representative will use its best efforts to obtain sub- representatives with days and hours of operation that are convenient for actual and potential customers for the service including extended business hours, seven day a week service and 24 hour service wherever possible and at strategic locations to provide convenient service to customers in highly populated areas of India, tourist areas and other areas to which transfers of funds are most likely to occur. Representative shall be responsible for bearing all fees, commissions, charges, expenses and remuneration of any kind whatsoever relating to Representatives sub-representatives. Representative will enter into an agreement with each sub-representative in a form approved in writing by Western Union in advance. Representative agrees that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uses enables to understand that Paul . Merchants Ltd. was agent (representative) of Western Union to ` provide service to the later effecting and completing money transfer in India reaching to the consumer herein, on behalf of the foreign principal and sub-representatives appointed by Paul Merchants Ltd. were equally responsible to carry out such activity. STATEMENT RECORDED DURING INVESTIGAION U/S 14 OF CENTRAL EXCISE ACT, 1944 WAS VALUABLE PIECE OF EVIDENCE 59.9 Statement dated 26.1.07 (available at page 168 of the appeal _ folder) recorded from Deputy Manager (Accounts) of appellant M/s Paul Merchants Ltd. revealed that this appellant was acting as representative of Principal Agent of Western Union abroad. In reply r to question no.1, she (Deputy Manager-Accounts) stated as under : Q.1 As regards money transfer, please write in detail the function of your company? Ans. The company is transferring money on the basis of contract with Western Union. A customer abroad approaches WU to send money for personal purposes to a person / relative in India. He pays the amount and charges to WU and in turn WU provides a Money Transfer Control Number. The customer abroad provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence for adjudication. IMPUGNED PERIOD AND RECEIPTS DID NOT ENJOY IMMUNITY FROM TAXATION NOT BEING EXPORT AS OPINED BY INVESTIGATION 59.12 The Show Cause Notice in terms of para 13 thereof clearly stated that the service provided by the appellant M/s Paul Merchants Ltd. were covered under sub-clause (ii) and (vi) of clause (19) of section 65 of Finance Act, 1994 with a conscious approach in para 15 of SCN reading as under :- 15. The taxable service provided to any person in respect of which payment is received in India in convertible foreign exchange was exempted from the whole of the Service Tax leviable thereon vide Notification No.21/2003-Slj dated 20.11.03. The said notification was rescinded w.e.f. 15.03.05 vide Notification No. 10/2005-S7] dated 03.03.05. Therefore although in the instant case the service provided by M/s Paul Merchants Ltd has been proposed to categorize under Business Auxiliary Service effective from 01.07.03 for the purpose of service in relation to promotion or marketing of service provided by the client and from 10.09.04 for the purpose of provision of service on behalf of client, yet the consideration received by M/s PML became taxable since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was concerned, the authority in para 4.8 of his order dealt the same V examining the agreements in question and came to the conclusion that the appellant had provided taxable service u/s 65(19)(ii) of Finance Act, 1994. All the money that was received for business promotion activities entered into taxation. 59.21 The authority dealt the plea of limitation in para 4.9 of his order and came to the conclusion that when the appellant failed to get registered and did not disclose the receipts and relevant facts filing returns but was detected by investigation in terms of RUD-3 to the SCN, the appellant was held to be liable to service tax invoking extended period of limitation due to suppression of the fact and questionable modus operandi followed which came, to light when the investigation detected escapement of the receipts from taxation. Accordingly, Adjudication was held not time barred. 59.22 The plea of cum tax value was denied by the adjudicating authority when the appellant failed to discharge its burden of proof to show that its receipts included service tax element and for such decision, he relied on the judgment of H0n bIe Supreme Court in the case of Amrit Agros vs. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Fedn. of Tax Practitioners Vs. UOI-2007 (7) STR 625 (SC), (especially para 20 of this decision), (iii) Whether the issue as to what constitutes export of services is to be determined with reference to provisions in Export of service Rules, 2005 only (iv) Whether the money transfer service provided by an intermediary in India acting on behalf of its principal for consideration paid by him, is export of service to the principal? Which is the service to be considered for deciding the factum of export-whether that provided to the principal abroad or that provided to the person receiving money in (v) Whether the destination of the impugned service to be determined on the basis of location of the consumer of the service in India or the location of the person abroad who requested for the service to be provided in India and paid for it and other criteria laid down in Export of Service Rules, 2005? (vi) Whether reimbursements of advertisements and charges towards sales promotion activities are to be taxed? (vii) Are the demands time barred? (viii)Whether the amounts paid to sub-representatives is excludible from the value of taxable service (ix) Whether cum-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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