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TMI Blog2015 (10) TMI 2221X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.03.2007, which mandates the requirement of payment of the services provided, in convertible foreign exchange. - Matter remanded back for rebate claim relating to March 2007 – Decided partly in favour of assessee. - APPEAL No. ST/339, 340/11 - - - Dated:- 5-8-2015 - Mr. M.V. Ravindran, Member (Judicial) And Mr. C.J. Mathew, Member (Technical) For the Petitioner : Shri Vinod Awtani, C.A. For the Respondent : Ms. P.V. Sekhar, Deputy Commissioner (AR) ORDER Per : M.V. Ravindran These two appeals are directed against Order-in-Appeal No. MI/AV/3 4/2011 dated 12.01.2011. 2. The issue involved in this case is denial of rebate claim of service tax paid under Notification No.11/2005-ST on the custodial services provided to Foreign Institutional Clients (FII s) located outside India. Service tax liability has been paid under the category of Banking and Financial Services under Section 65(105)(zm) for the period May 2006 to March 2007. Both the lower authorities have held against the appellant on the ground that (a) Services rendered by the appellant cannot be treated as delivered outside India (i) As the securities accounts are maintained on serve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Export of Service Rules, 2005 . The lower authorities have rejected the refund claim only on the ground that the requirement of maintenance of accounts whch are in respect of Indian Companies and in India hence there was no export of service. 5.2 We do not agree with the findings recorded by both the lower authorities for more than one reason. 5.3 Firstly, the services rendered by the appellant are to Foreign Institutional Clients in respect of investments made by them in India. 5.4 Secondly, the services are for the companies situated abroad hence they are rendered or delivered outside India for the Companies situated abroad. 5.5 Thirdly, on plain reading of the provisions of Rule 3(1)(iii), we find that the sub rule reads as under:- 3. (1) the export of taxable service shall in relation to taxable services, - (iii) Specified in clause (105) of Section 65 of the Act, but excluding, - (a) sub-clauses (zzzo) and (zzzv); (b) those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and (c) those specified in clause (ii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 3, the following rule shall be substituted, namely :- 3. Export of taxable service. - (1) Export of taxable services shall, in relation to taxable services, - (i) specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), (zzzh) and (zzzr) of clause (105) of section 65 of the Act, be provision of such services as are provided in relation to an immovable property situated outside India; (ii) specified in sub-clauses (a), (f), (h), (i), (j), (l), (m), (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf) and (zzzp) of clause (105) of section 65 of the Act, be provision of such services as are performed outside India: Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India; (iii) specified in clause (105) of section 65 of the Act, but excluding, - (a) sub-clauses (zzzo) and (zzzv); (b) those specified in clause (i) of this rule except when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India in the Ministry of External Affairs numbers S.O. 429(E), dated the 18th July, 1986 and S.O. 643(E), dated the 19th September 1996. 16. We find that the condition of payment in foreign exchange is not mentioned in Rule 3(1). When that condition is not mentioned, there is no requirement for services enumerated in 3(1) for receipt of payment in foreign exchange rate so as to quality as export of Foreign Service. In other words, 3(1) and 3(2) appear to be independent. As far as the appellant is concerned, their services would squarely fall within the category of 3(1) and therefore, the conditions given in 3(2) would not be applicable to them. In fine, Notification dated 19-4-2006 has also not changed the position as far as the appellant is concerned. 17. Now let us examine the last amendment vide Notification 2/2007-S.T., dated 1-3-2007. For clarity the said amendment is reproduced below : In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Export of Services Rules, 2005, namely :- 1. (1) These rules may be called the Export of Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would violate this fundamental principle of taxation. Further, the fact of the matter is Satyam (India) acts as an agent of the appellant. They procure business for the appellants by virtue of their brand image and reputation. It is the appellants who render the services directly to the recipients situated abroad. The payment is also rendered only in foreign exchange though by their agent, viz. Satyam (India). This is evident from the plethora of record submitted by the appellant. Hence, even if it is assumed that right from the beginning, there was a requirement for getting the payment in foreign exchange, we would hold that the appellant would be satisfying such a condition also by a liberal interpretation of the notification. Alternatively, what is received by the agent Satyam in foreign exchange would be deemed to have been received by the appellant for the purposes of EOSR. 5.7 The above said ratio will cover the issue in respect of rebate claim of the appellant for the period May 2006 to February 2007. Accordingly we hold that the impugned orders to that extent are incorrect and liable to be set aside and we do so. Impugned order is set aside to that extent and the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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