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TMI Blog2020 (12) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... e period involved is 2007-08 to 2010-11 and the show cause notice was issued on September 27, 2012. 3. The appellant is a manufacturer of food processing machines. The appellant is also registered under service tax for the provision of taxable services under the category of "erection, commissioning and installation service‟. During the relevant period, the appellant provided services to various food processing machine manufacturers located outside India by way of acting as a commission agent for sale of their products in and outside India. In this regard, the work undertaken by the appellant for foreign companies involves procuring orders on behalf of foreign companies and receiving sales commission in lieu thereof. The commission received by the appellant from the foreign companies in convertible foreign exchange was duly reflected in the balance sheets for the relevant period. The said services provided by the appellant are classifiable under BAS. Considering these services to qualify as "export of services", the appellant did not pay service tax during the relevant period. 4. An audit of the appellant was, however, conducted and the same resulted in issuance of a show ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documentary evidence to establish export of services. In the case laws as cited, it was established that the services were provided to the clients located outside India, which is not the case with the appellant. When export of services could not be established, benefit of the provision cannot be granted." . 7. Shri B.L. Narasimhan, learned counsel for the appellant made the following submissions: (i) The appellant is not liable to pay service tax on commission received from foreign companies. The activities of the appellant qualify as export of services under the provisions of Export of Services Rules, 2005 [The 2005 Rules] in as much as: (a) the service recipient i.e. foreign principal is located outside India; and (b) the payment is received in convertible foreign exchange. In this connection learned counsel placed reliance on various decisions to contend that the provision of services of promotion and marketing of goods of foreign companies in India would qualify as export of service; (ii) The appellant had provided sufficient evidence of services being export. In the appeal filed before Commissioner (Appeals), the appellant submitted copies of debit notes and correspondin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied, namely:- (a) deleted (b) payment for such service is received by the service provider in convertible foreign exchange." 13. Rule 4 of the 2005 Rules provides that any service, which is taxable under clause (105) of section 65 of the Finance Act, may be exported without payment of service tax. . 14. The Circular dated February 24, 2009 issued by the Central Board of Excise and Customs, New Delhi [CBEC] deals with applicability of the provisions of the 2005 Rules in certain situations. The relevant portion of the Circular is reproduced below : "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 (N.T.) dated 14-3-2006 on the ground that these activities do no satisfy the condition "used outside India‟,- (i) Call centres engaged by foreign companies who attend to calls from customers or prosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India. In all the illustrations mentioned in the opening paragraph, what is accruing outside India is the benefit in terms of promotion of business of a foreign company. Similar would be the treatment for other Category III [Rule 3(1)(iii)] services as well. 4. All pending cases may be disposed of accordingly. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned. These instructions should be given wide publicity among trade and field officers." 15. When the 2005 Rules were amended w.e.f February 27, 2010, another Circular dated May 13, 2011 was issued by CBEC and the relevant portion is reproduced below: "Circular No. 111/05/2009-S.T. was issued on 24th February 2009 [2009 (13)S.T.R. C87] on the applicability of the provisions of Export of Service Rules, 2005 in certain situations. It had clarified on the expression "used outside India" in Rule 3(2)(a) of the Export of Service Tax Rules, 2005 as prevalent at that time. The condition specified in Rule 3(2) has been omi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary companies or associated enterprises. In order to establish that the services have not been used outside India the facts available should inter alia, clearly indicate that only the payment has been received from abroad and the service has been used in India. It has already been clarified that in case of call centers and similar businesses which serve the customers located outside India for their clients who are also located outside India, the service is used outside India." (emphasis supplied) 16. A perusal of rule 3 (2) of the 2005 Rules, as it existed prior to February 27, 2010, would indicate that the provision of any taxable service specified in sub-rule (1) of rule 3 shall be treated as export of service when the following two conditions are satisfied: (a) such service is provided from India and used outside India; and (b) payment of such service is received by the service provider in convertible foreign exchange. 17. The appellant has not contended that it is not rendering a service under the category "BAS". What is, however, contended by the appellant is that the services rendered by the appellant qualify as "export of service" under the 2005 Rules and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar dated February 24, 2009. 21. In GAP International Sourcing (India) Pvt. Ltd. vs. Commissioner of Service Tax [2014-TIOL-465-CESTAT-DEL], the service provided by the appellant therein was in relation to procurement of goods from India and for this purpose, the appellant conducted survey of the manufacturers of various products required by GAP, USA and recommended vendors who could supply the goods. The appellant also conducted inspection of the export consignments and issued the inspection certificates. It was, therefore, not in dispute that the services provided by the appellant were BAS. The dispute, however, was whether the services qualified as export in terms of the 2005 Rules and, therefore, not taxable in India. It is in this context that the Tribunal held that the services provided by the appellant were obviously meant for and were used by GAP, USA for their business and, therefore, these services would be treated as exported out of India. The contention of the Department that the condition of "used outside India" were not satisfied was not accepted by the Tribunal. The relevant portion of the decision of the Tribunal is reproduced below: "6. The service provided by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not capable of being used in territory other than the place where the same have been provided. According to the department most of the time, the provision and use of the services is happening simultaneously and it would be to naive to even conceive that services of merchandising, product integrity, vendor compliance, quality assurance, fabric sourcing and logistic support etc. provided in India can even be used remotely in a territory other than where the same have been provided. It has been pleaded that if M/s GAP, U.S.A. were even to try using these services in a place other than India, it will not be physically possible. It has also been pleaded that routing if payment for a service cannot determine the place of consumption. 7. In our view the arguments of the department are absurd as the DR has not mentioned as to who is the consumer of the services in India, if the services, in question, provided in India by the appellant have not been used and consumed by their principal in U.S.A. When the appellant identify the vendors for their principal abroad on the basis of the quality of their products, their manufacturing infrastructure, compliance with child labour laws and poll ..... X X X X Extracts X X X X X X X X Extracts X X X X
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