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TMI Blog2023 (8) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... The department believed that service tax was leviable on this commission received by Arcelor India since the services were performed and consumed in India and they would not qualify as export of service. This contention was repelled by the larger bench and it was observed that though the goods were being supplied to customers in India, the actual recipient of BAS provided by Arcelor India is Arcelor France. Thus, irrespective of whether the 2005 Export Rules or the 2012 Rules are applicable, the appellant would render export of service which was not taxable till 01.10.2014, whereafter it became taxable as the appellant became an intermediary. Extended period of limitation - HELD THAT:- In the present case, the appellant, as is seen from the impugned order, had filed ST-3 Returns for the period from July 2012 to September 2014 and had shown the whole commission earned during the relevant period. The order also takes notice of the fact that the appellant had by a letter dated 31.07.2012 revealed to the department that it was providing services to the foreign entity for the products sold in India and that it had received commission payment for such services. It also needs to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate to refer to the show cause notice dated 03.09.2014 and the relevant portions are reproduced below: 6. Vide letter dated 04.08.2014 (RUD-3) the assessee intimated that being Export of Service, hence the service is exempt and no service tax have been paid, however, provided the information regarding total commission received from them from obroad to the tune of Rs. 32,55,304/- as Commission during the period 01.07.2012 to 31.03.2013. xxxxxxxxx 8. Whereas from the above it appears that assessee had provided marketing services to foreign clients and the same is classifiable as BAS but the assessee did not pay service tax on the same stating that the services provided by them falls under the category of Export of Services and hence exempt from service tax. 9. xxxxxxxxxx. Market was explored in India on behalf of foreign Principal to serve the target group of customers in this defined territory. There was no export of service at all made by the assessee. Therefore, by no innovative argument, the service provided in India can be converted into export of service. When promotion of market was intended in respect of defined Territory that cannot be construed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... III under Export of service Rule, 2005 the condition that the services provided by them had a foreign location have to be satisfied by them by proving that the services were provided abroad and not in India. However, I observe that the overall activities of the party as mentioned in the impugned SCNs resulted in provision of Business Auxiliary Services in India only, thereby making them liable to pay service tax under Business Auxiliary Service . Therefore, I hold them liable to pay service tax under Business Auxiliary Service . (emphasis supplied) 7. This order dated 27.07.2016 passed by the Additional Commissioner led to the filing an appeal by the appellant before the Commissioner (Appeals) and the main contention that was advanced was that the 2005 Export Rules referred to in the show cause notice were not applicable w.e.f. 01.07.2012 since they had been superseded by the 2012 Rules that came into effect from 01.07.2012. The Commissioner (Appeals), after noting the contention of the appellant that during the period of dispute, rule 3 of the 2012 Rules would be applicable and not rule 3(2) of the 2005 Export Rules, observed that to understand this issue the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered under intermediary services. I therefore, do not find myself in agreement with the contention of the appellant particularly when their grounds of Appeal, the appellant has not offered any elaborate discussion or any agreement to establishes them as an intermediary. As such, the services provided by them within Indian Territory have correctly been classified to be taxable under Business Auxiliary Service. (emphasis supplied) 9. The Commissioner (Appeals) also referred to rule 6A of the Service Tax Rules 1994 [the 1994 Rules] and the Circulars dated 13.05.2011 and 24.02.2009 and observed as follows: The above circular when seen in the light of the facts of the case clearly show that the each of the services involved in the subject issue are in fact the events and activities which are destined to be exhausted in India and become extinct soon after their performance. I am of the opinion that what is material for levy is the activity or the event and the soil or territory on which such an event or activity gets performed and become extinct, because the end user of the appellant's output services were located in India and the need of the customers is met by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned Order-in-Original has correctly held that the services provided by the appellants are not export as the performance, use and consumption of services happen simultaneously and these all happen in India only owing to which the recipient cannot be termed to have been located outside India . As such, when there is no difference between the spirit of Rules 3 of ESR 05, Rule 3 of the POPS Rules, 2012 and Rule 6A of Service Tax Rules, 1994, no intervention is warranted in the impugned order. (emphasis supplied) 12. The Commissioner (Appeals) also held that the extended period of limitation had been correctly invoked for the reason that the appellant could have sought clarification from the department, but such an effort was not made. 13. Shri S. Radhakrishnan, learned counsel for the appellant submitted that the Commissioner (Appeals) committed an illegality in confirming the demand in as much as the 2005 Export Rules relied upon in the show cause notice had been superseded by the 2012 Rules. Learned counsel, also submitted that even under the 2012 Rules, the services would be export of service till 01.10.2014 and, therefore, not taxable. 14. Shri Rajeev Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification. 18. As noticed above Rule 6A of the 1994 Rules deals with export of services and sub-clause (d) of rule (1) provides that the place of provision of service should be outside India. The place of provision of service is determined under the 2012 Rules. Rule 3 deals with provision of place generally. It is as follows: 3. Place of provision generally.- The place of provision of a service shall be the location of the recipient of service: Provided that in case of services other than online information and database access or retrieval services, where the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service. 19. Rule 9, however, deals with place of provision of specified services and is as follows: 9. Place of provision of specified services.- The place of provision of following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner (Appeals) completely failed to appreciate that so far as the appellant is concerned it was merely providing services to Kruss Germany (a foreign supplier) and the service charges were received by the appellant in convertible foreign exchange. The goods may have been ultimately supplied by Kruss Germany to an Indian entity on the basis of the market survey conducted by the appellant, but this would not mean that the appellant had rendered service to an Indian entity. The appellant would, therefore, clearly be a service provider and the foreign entity would be the service recipient. In terms of rule 3 of the 2012 Rules, the place provision of service is where the recipient of service is located and under rule 6A of the 1994 Rules and rule 3 of the 2012 Rules the place of any service is treated as export of service when the provider of service is located in a taxable territory; the recipient of service is located outside India; and the payment for such service has been received by the provider of service in convertible foreign exchange. 26. The Commissioner (Appeals), therefore, committed an error in holding that the location of the recipient of service is in India. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the terms and conditions of supply, a written contract is executed between the Indian customer and the foreign mills or a purchase order is placed on the foreign mills. The documents are prepared by the foreign mills in the name of the Indian customer and the Indian customer, in turn, pays the foreign mills. Thus, the goods directly pass from the foreign mills to the Indian customer. 2. A part of the commission received by Arcelor France, as the main agent, from the foreign mills is paid to Arcelor India based on the volume of sales in each quarter in convertible foreign currency. A dispute arose in relation to such commission received by Arcelor India from Arcelor France for the period from April 2005 to January 2009 . According to Arcelor India, there is no privity of contract between it and the steel mills located outside India and it received the consideration only from Arcelor France. It, therefore, did not collect or pay service tax on the commission received from Arcelor France from April 2005 to January 2009. The department, however, believed that service tax was leviable on the commission received by Arcelor India from Arcelor France since the services were perfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn mills and not as an agent or service provider for the customers in India. There is no contractual relationship between Arcelor India and the customers in India. Therefore, even though the goods in the form of steel products are being supplied to customers in India, the actual recipient of BAS provided by Arcelor India is Arcelor France. Arcelor France has used the services of Arcelor India to provide services as main agents to the mills located outside India. 48. The reasoning adopted by the department is that the services of commission agent were used in India to cater to the Indian markets. It is not possible to accept this reasoning of the department. The Circular dated 24.02.2009 also categorically states that for the services to fall under rule 3(1)(iii) of the 2005 Export Rules, the relevant factor is the location of the service receiver. In other words, the place of performance of the service or the place where the customers of the service receiver are located is irrelevant. 49. As noticed above, it was the consistent view of the High Courts and the Tribunal that export of service would take place under rule 3(1)(iii) of the 2005 Export Rules if a person residing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Union of India and ors. [W.P. (C) 7542/2018 decided on 06.04.2023] and the relevant portion of the judgment is reproduced below: 32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification . The respondents have surmised that this would have been the normal course for any person acting with common prudence. However, it is apparent from the statements of various employees of MTNL that MTNL did not believe that the amount of compensation was chargeable to service tax and therefore, there was no requirement for seeking clarifications. Further, there is no provision in the Act which contemplates any procedure for seeking clarification from jurisdictional service tax authority. Clearly, the reasoning that MTNL ought to have approached the service tax authority for clarification, is fallacious. 33. It is also important to note that MTNL had declared the receipt of compensation as income in its books of accounts. The final accounts of MTNL are in public domain. In the circumstances, the allegation that MTNL had suppressed any material facts from the Service Tax Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any material fact. MTNL s contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return. 42. We agree with the contention that the impugned show cause notice was issued beyond the period of limitation and is, thus, liable to be set aside. (emphasis supplied) 48. A perusal of the aforesaid judgment of the Delhi High Court reveals that when an assessee believes that the amount received was not chargeable to service tax, there is no requirement for seeking clarification, more particularly when the Finance Act also does not contemplate any procedure for seeking clarification from the jurisdictional service tax authority. The Delhi High Court also emphasised that it is only when an assessee knowingly and deliberately with an intent to evade payment of service tax, which it was aware would be leviable, suppresses receipt of consideration for rendering a taxable service, that the extended period of limitation can be invoked. 49. In the present case, the appellant, as is seen from the impugned order, had filed ST-3 Returns for the period from July 2012 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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