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TMI Blog2013 (4) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... ries performed the onsite services on behalf of the appellant at the customers' premises abroad. The appellant' subsidiaries located outside India are independent entities and they are not appellant's agents - Therefore, it cannot be said that the onsite services provided by the subsidiary have been rendered from India to the appellant's customers abroad. Thus the first condition that the service should be provided from India to constitute export is not satisfied. Regarding allowing CENVAT credit - Duty paying documents - Held that:- On the ground that PAN based registration nos. were not mentioned in the input invoices - The matter needs to be considered by the adjudicating authority in the light of Board's Circular No. 112/6/09-ST dated 12/03/2009 and 120/01/10-ST dated 19/01/2010. If payment of service tax can be confirmed from the particulars available in the invoices and receipt of input services by the appellant can be established, there is no reason to deny the CENVAT credit merely because the PAN based registration number is not quoted in the input service invoices. Similarly, in the case of Manikchand Galaria unit which was earlier not included in the centralized reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they are not able to utilize the CENVAT Credit availed by them. Hence, in terms of Rule 5 of the CENVAT Credit Rules, 2004 read with the Notification No. 05/2006-CE(NT) dated 14/03/2006, they have been filing refund claims of the un-utilized CENVAT Credit from time to time. In the adjudication of the said refund calims, the jurisdictional Assistant Commissioner sanctioned the refund claims in fourteen cases, which was set aside by the Commissioner(Appeals)- ten claims by a common order-in-appeal and four claims by four separate orders-in-appeal namely, No. PIII/RS/120/2012 dated 30/03/2012 (ii) PIII/RS/128/2012 dated 17/04/2012 (iii) PIII/RS.154/2012 dated 30/04/2012 and (iv) PIII/RS/181/2012 dated 29/05/2012. M/s TML is in appeal against aforesaid orders-in-appeal before this Tribunal. However, in respect of seven cases, the Assistant Commissioner withheld the refund claims relating to onsite services provided by M/s. TML's subsidiaries located outside India pending receipt of clarification sought by the department from the Central Board of Excise and Customs. In Appeal, by both M/s. TML and the department, the aforesaid orders of the Assistant Commissioner were disposed of by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an branch. Rejecting this claim, the European Court of Justice held that FCE Italy is not the establishment which provided the service but it is only the headquarters in UK. 3.2 The Second submission is that service tax is a contractual levy and is leviable on each contract of service. Vide Circular No. 334/1/2010-TRU dated 26/02/2010, a clarification was provided stating that a hospital treating employees of a business establishment is providing services to the business establishment and not to the employee treated by the hospital as there is no privity of contract between employees and hospital. Similarly, vide Circular No. 138/7/2011/ST dated 06/05/2011 it was clarified that service tax is leviable on any taxable service provided, whether or not the services are provided, whether or not the services are provided by a person in his capacity as a sub-contractor. Similarly, in the Education Guide released in 20121 at the time of introduction of negative list of services, it has been clarified that services are provided from the place/premises of the service provider. In the National Building Construction Corporation Ltd., vs. Commissioner of Central Excise, reported in 2011 (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is intangible in nature, it is very difficult to determine the suits or locale of a service. In the Education Guide published by the CBEC, in guidance Note 5 relating to the Place of Provision of Services Rules, 2012, it has been stated that it is also a common practice to largely tax services provided by business entities, based on the location of the customers, and services from business to consumers, based on the location of the service provider. Since the determination in terms of above principle is not easy or sometimes not practicable, nearest proxies are adopted to provide specificity in the interpretation as well as application of the law. It is in this context Export of Service Rules, 2005 have been framed to determine the place of provision of service. If the phrase "Service provided from India" appearing in Rule 3(2) (a) has to be answered ab initio again, it would be begging the very question sought to be silenced by Rule 3(1) (i), 3(1) (ii) and 3(1) (iii). In the present context if the recipient of the information technology service is located outside India, it would be treated as received from India. 3.4 The fourth submission is that the expression service provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided to the employees in respect of their Leave Travel Allowances/Concession, discrepancies in the invoices by non-mentioning of PAN based registration number, denial of CENVAT Credit on account of the unit not being covered under centralized registration and so on. However, in respect of a few of these, they are claiming the CENVAT Credit. In respect of discrepancies in the inputs service invoices due to non-mentioning of PAN based registration number, in view of Circular No. 112/6/2009-ST dated 12/03/2009 wherein it has been clarified that in respect of grant of refund to exporters, verification of registration certificate of the supplier of service is not required and the refund should not be rejected on account of minor procedural infractions, if from the other particulars given in the service tax invoice, the payment of service tax can be verified. Similarly in respect of Manikchand Galaria Unit of the appellant which was not covered under the centralized registration, it is submitted that the said premises is a bonded area and registered with the service tax authorities and the appellant has paid service tax on renting of immovable property service to the service provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ................. The Export of Services Rules, 2005 were again amended vide Notification No. 06/2010-ST dated 27/02/2010. By this amendment, clause (a) of sub-rule (2) was omitted. Sub-rule (2) of Rule 3 now reads as follows: '(2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely- (a) Omitted (b) Payment for such service is received by the service provider in convertible foreign exchange. Explanation........ 4.4 In the present case, TML has filed 21 refund claims. Out of these, 16 claims are pertaining to the period prior to 27/02/2010 starting from the month of November, 2008. The remaining 5 claims are pertaining to the period post 27/02/2010. TML's claim that it has exported taxable output services from India needs to be examined in light of the above provisions of the Export of Services Rules, 2005. Admittedly, some portions of the output services have been provided to the overseas customers by TML's subsidiaries located outside India as per the contracts entered into between TML and its overseas customers or between TML and its subsidiaries located ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifies this position. Clause 19 of the said Agreement provides for relationship between them and reads as follows:- "19 Relationship: All dealings between the Parties shall be in accordance with the arm's length standard and nothing contained herein shall be construed as constituting any relationship of agency or joint venture or partnership between the Parties or management of any operations of TML in America relating to this Agreement or otherwise by TMInc America." On a plain reading of the above clause, there cannot be any doubt that TML's subsidiaries located in America are independent contractors and they are independently providing software development service to TML's overseas customers. Therefore, TML's contention that its overseas subsidiaries are acting as its agents is hollow and bereft of any merit. 4.7 N/s TML has relied on the majority decision of the Hon'ble Tribunal in the case of M/s. Paul Merchants Ltd. V/s. CCE, Chandigarh to support its case. From the facts of this case, it is seen that Western Union Financial Services, Inc. (in short WU) with its principal place of business at Panama, New Jersey provides services of money transfer from one cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.9 It is also claimed by TML that it is paying service tax on the services received from its subsidiaries under the reverse charge mechanism in terms of Section 66A of the Finance Act, 1994 read with Taxation of Services (Provided from outside India and Received in India) Rules, 2006. Hence it is eligible to avail CENVAT credit in respect of service tax paid by it on the remittances made to the overseas subsidiaries for the on-site software development services received by it. The above claim of TML is a misnomer and contrary to the facts of this case. Factually TML does not receive any services in India from its overseas subsidiaries who provide services to TML's overseas customers who use the same outside India. Therefore, the above claim also merits to be rejected. 4.10 As an alternative claim, it is contended that if the refund claim is not allowable under Rule 5 of the CENVAT Credit Rules, 2004, in that event its claim for refund of service tax should be allowed under Section 11B of the Central Excise Act, 1944 considering the fact that the service tax has been paid by it erroneously. In this regard, TML has sought to take support from the Tribunal's decision in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for export of taxable services and sub-rule (1) of Rule 3 classifies the taxable services under three categories and export of information technology software service, which is the service involved in the present case, comes under category 3 which specifies services in respect of which the recipient of service is located outside India. Rule 3(2) as amended by Notification No. 2/2007-ST dated 01/03/2007, reads as follows:- "(2): The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:- (a) such service is provided from India and used outside India; and (b) payment for such service provided outside India is received by the service provider in convertible foreign exchange. Explanation:................. The said Rule, was amended vide Notification No. 06/2010-ST dated 27/02/2010 so as to omit clause (a) and after the said amendment, it read as follows: '(2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely- (a) Omitted (b) Payment for such serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) PIII/RS/128/2012 dated 17/04/2012 (iii) PIII/Rs.154/2012 dated 30/04/2012 and (iv) PIII/RS/181/2012 dated 29/05/2012 cannot sustain and the appellant will be eligible for the refund amounts covered by these orders which has been denied to them for the reason that the refund claims pertain to the period after 27-2-2010 and the condition of export as provided in Rule 3(2) has been satisfied. Similarly, the appellant would also be eligible for the refund of Rs.10,19,568/- for the period March 2010, which was denied to them vide order-in-appeal No. PIII/RS/198-2007/2011 dated 25/07/2011. Thus, what is left for consideration is only the refund claims pertaining to the period prior to 27/02/2010 covered by order-in-appeal No. PIII/VM/227-280/2010 dated 20-10-2010 against which Revenue has filed the appeals and order-in appeal No. PIII/RS/198-2007/2011 dated 25/07/2011 against which TML has filed the appeals. 5.5 For the period prior to 27/2/2010, for a transaction to be considered as 'export', two conditions were required to be satisfied, namely, (i) such service provided from India and used outside India and (ii) payment for such service provided outside India is received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Further, as per the details of the service provided by the appellant's subsidiaries abroad, it is seen that they relate mainly to "Maintenance, Defects and Updates (Installation, Enhancements and Bug fix), Testing (Integration test, system test, end to end test, performance test, regression test, user acceptance test and deploy solution test) and Test co-ordination". From the nature of the activities, it is obvious that these services cannot be performed form India at all as the service recipient's systems are located abroad. Maintenance, testing, removal of defects, etc. of the systems located abroad has to be done at the site where the systems are located. Thus from the nature of the activities undertaken with respect to onsite services, it is seen that they cannot be performed in or provided from India. The appellant had also referred the matter to the Central Board of Excise and Customs seeking clarification in this regard and the CBEandC vide letter dated 23/11/2009 had clarified that if the services are rendered partly offsite and partly onsite, then only that operation provided from India (off shore service) can be treated as export. The CBEandC clarification was also base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not help since the said Rules were not in existence when the impugned transactions took place and came about much late. There cannot be a retrospective application of a law unless the law itself specifically provides for the same. Every law has to be construed and interpreted based on the language used at the relevant time. If the language is unambiguous and clear, there is no need to refer to any external aids to interpret the law. In the present case, for the period prior to 27/2/2010, to constitute exports, two conditions were required to be satisfied, namely the service should be provided from India and used outside India and consideration for the service rendered should be received in convertible foreign exchange. There is no ambiguity in the language used. As far as the service rendered on site abroad, the first condition is not satisfied and therefore, on-site services can not be considered as export during the relevant period and we hold accordingly. If the intention of the legislature was to treat onsite transactions as exports, then the legislature would have stated the same explicitly as in the case of category II services, where even if the services are partly perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for under section 66A of the Finance Act, 1994. It is not the contention of the appellant that the said transaction does not amount to import of services. If the appellant's contention is that they were not required to pay service tax on the services received from their subsidiaries abroad, then such a claim should have been made before the lower adjudicating and appellate authorities. Having not done so, such a plea cannot be entertained at this stage. 5.10 The appellant has also made a plea for allowing CENVAT credit which was denied to them, inter alia, in two cases. An amount of Rs, 78,86,646/- was denied on the ground that PAN based registration nos. were not mentioned in the input invoices. Another amount of Rs.16,09,316/- was denied in respect of renting of immovable property in respect of Manikchand Galaria Unit on the ground that the said premises were not covered under the centralized registration issued to the appellant initially but subsequently included. As regards the first case, the matter needs to be considered by the adjudicating authority in the light of Board's Circular No. 112/6/09-ST dated 12/03/2009 and 120/01/10-ST dated 19/01/2010. If payment of service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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