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TMI Blog2023 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... , Intellectual Property Services, etc. They are registered with the Service Tax Department and are filing ST-3 returns periodically in terms of Rule 7 of the Service Tax Rules, 1994. 5. On scrutiny of records, it was noticed by the Department that the appellant had provided roaming services to international inbound roamers and that the appellant received income for rendering such services from the home network of the visitors. It was observed that the appellant had not paid Service Tax on the international inbound roaming charges for the period from July 2012 to September 2013. On enquiry, the appellant informed that they have received income in foreign currency for rendering such services and that the services rendered by them qualify as 'export of services' in terms of the Export of Services Rules, 2005. According to the Department, the appellant charged an amount for 'international roaming' from their partner foreign network operators [for latter's customers while roaming in the taxable territory (India)]. Since these services were provided in India by the Indian service provider and consumed in the Indian taxable territory, the Department entertained a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant's services. The Department has taken the view that the FTO is merely a co-ordinator who arranges for the services to the inbound roamer; that the FTO would not become the service recipient merely because payments are made by the FTO to the appellant in convertible foreign exchange. That the authorities below have taken the view that the transaction would not amount to 'export of services' for the period from July 2012 to September 2013 because the service recipient (inbound roamer) is located in India for the entire duration when the roaming services are rendered. That the service is provided within India to the inbound roamer as per Rule 3 of the Place of Provision of Services Rules, 2012 ('POPS Rules'). It is concluded by the Department that the activity cannot be treated as an export of service under Rule 6A of the Service Tax Rules, 1994 because the conditions in Rule 6A(d) of the Service Tax Rules are not satisfied as the place of provision of service is within India. 7.3 She submitted that the Tribunal in the appellant's own case for the very same set of facts and issue, as reported in M/S. Vodafone Cellular Ltd. v. Commissioner of G.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming services on the ground that these amounted to export of services in terms of Rule 5 of the Export of Services Rules, 2005 read with Notification No. 11/2005-S.T. dated 19.04.2005. That though the rebate claims were rejected by the Original Authority, the appellant had preferred a Revision Application before the Government of India. After adjudication, the Revisional Authority allowed the rebate claims, which would establish that provision of international inbound roaming services is in the nature of export of services. 7.6 She argued that all these facts have already been considered by the Tribunal in the appellant's own case and the Tribunal has set aside the demand for the earlier period as well as subsequent periods. That the present dispute, which pertains to the period from July 2012 to September 2013, is the period sandwiched between the periods of dispute in the earlier cases. 7.7 She prayed that the appeal may be allowed. 8. Smt. Sridevi Taritla, Learned Authorized Representative for the Revenue, supported the findings in the impugned order. 9. Heard both sides. 10. The facts have already been narrated in detail and we find that the very same issue has been co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming services received by a subscriber of foreign telecom company who visits India. It is not in dispute that the appellant had received consideration from the foreign telecom company for providing such international roaming. In other words, department does not have a case that consideration as received by the appellant from the person who was on visit in India and was receiving services from appellant as a subscriber of foreign telecom company. The international inbound roamer is not a subscriber of the appellants. The department has proceeded with the view that the actual beneficiary of the service is the inbound roamers and the appellant being a service provider for such international roaming facility, the service would fall within the levy of service tax. In fact, even though the actual beneficiary of the service is inbound roamer, there is no agreement by the appellant to provide service to the actual inbound roamer. The agreement to provide service is between the appellant and the foreign telecommunication company. Thus, for the appellant, the service recipient can only be the foreign telecommunication company and not the international inbound roamer. In case of any difficult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces received from outside India also fall within the scope of the master circular. Further, in the case of Verizon Communication India Pvt. Ltd. (supra), the Hon'ble Delhi High Court had considered the issue whether the master circular supersedes the earlier circulars. The Hon'ble High Court had concluded that the circular dated 23.8.2007 makes it explicit that all circulars, instructions and communications issued from time to time stand superseded by the Master Circular. The relevant paragraph is extracted below:- "42. Circular No. 90/1/2007, dated 3rd January, 2007 concerned provision of telephony services to subscribers of international telephone service providers who may be on a visit to India and are availing the inbound roaming services. The said Circular clarified that a telephone connection did not necessarily mean providing a telephone instrument or providing sim card. Even if a number was allocated temporarily to an inbound roamer and used internally it remained a service of a telephone connection. It was clarified that during the period of roaming, "the Indian Telecom service provides telephone service to an international inbound roamer. This service to an inbound roam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1.2007 has to be applied for levy of service tax is not sustainable. 5.6 The ld. counsel for appellant has also furnished the order passed by the revisionary authority in their own case vide order No.01-05/2018-ST/ASRA/Mumbai dated 23.1.2018. It is submitted by the ld. counsel that the appellant was earlier paying service tax on these services and claiming refund / rebate. In such proceedings, wherein the refund claim was filed by the appellant after paying service tax, the revisionary authority has granted the refund after considering all the circulars as well as the decision in the appellant's own case and the case of Verizon Communication India Pvt. Ltd. (supra). Paragraphs 15 and 16 of the said revisionary order makes it clear that the revisionary authority has taken note of all the circulars of the Board as well as the decisions relied upon by the appellant to grant the refund for the period prior to 1.4.2011. After 1.4.2011, appellant stopped paying the service tax for which show cause notices have been issued. It is clear from the order of Revisionary authority that when the appellant had paid service tax and filed refund claims on the very same services, the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to export of services." Apart from this para, I do not find any discussion in the said order in respect of the provisions of law and facts for the period post 01.07.2012. The entire order discusses the issue vis a vis the master circular issued by the Board dated 23.08.2007, withdrawing/ superseding the earlier circulars including the Circular No. 90/1/2007 dated 03.01.2007. On the basis of the decision of the Hon'ble High Court of Delhi in case of Verizon Communication 2017-TIOL-1863-HC-Del-ST, has concluded in para 5.5, that Master Circular has superseded the earlier Circulars and Circular 03.01.2007 cannot be applied. 1.2 Tribunal thereafter has referred to the order of Government of India, Order No order No. 01-05/2018-ST/ASRA/Mumbai dated 23.1.2018, whereby the Government has allowed the refund/ rebate claims filed for the period prior to 01.04.2011, as they were paying service tax on the said services provided by them till 01.04.2011. However the order itself records that the appellant had stopped paying the service tax after 01.04.2011. 1.3 Commissioner has in the impugned order, observed as follows, for holding that the services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment to issue the above notification at all. "When a notification is issued by an executive authority in exercise of a power conferred by statute that notification is as much a part of the law as if it had been incorporated within the body of the statute at the time of its enactment", quoted the Supreme Court in the case of East India Commercial co Ltd [1983 (13) ELT 1342]. The very issue and wordings of the above notification (emphasized above in bold) prove that the Service Tax law considers the inbound roamer not the foreign telecom operator - as the service recipient. The notification had waived the non-collection of tax for the period up to 14-01-2007 only. This aspect has been clarified by the CBEC in its Circular No. 90/1/2007-S.T. dated 03-01-2007, wherein it was noted that: "During international roaming, the visiting network provides service to a person treating him as a subscriber on a temporary basis for the period during which service is availed of by such person from the visited network. The only difference is that the payment is not directly received from the subscriber, but the same is routed through the home network. However, this does not alter the ess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritory and therefore I find that this condition is not satisfied by Vodafone. Therefore, the impugned services provided by them cannot be considered as 'export of service'. In any case, I may point out here tat Rule 6A ibid does not provide any exemption for export of services. This Rule merely enables the government to issue notification for the purpose of granting rebate of excise duty / service tax paid on inputs / input services used in providing services which are exported. Hence, I hold that Rule 6A of the Service Tax Rules, 1994 does not provide any relief to Vodafone in the present proceedings." 1.4 The finding of the Commissioner to that effect have not been considered and set aside by any authority. The finding of fact rendered by the Commissioner in respect of the manner of provision of the services clearly indicate that inland roaming services to the customer of the MTO located elsewhere, are provided through unique identification number assigned to the customer of the MTO located elsewhere without even assessing the network of the MTO located elsewhere shows that the customer of MTO is the recipient of service and is located in India. It is only the billing fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Clearing House There are well known bodies like MACH who interface between different roaming partners to help them to exchange their CDRs, setting up roaming agreements and resolving any dispute. Clearing houses receive billing records from one roaming partner for the inbound roamers and submit billing records to another roaming partner for which this roamer would be called outbound roamer. What is TAP3? Transferred Account Procedure version 3 (TAP3) is the process that allows a visited network operator (VPMN) to send billing records of roaming subscribers to their respective home network operator (HPMN). TAP3 is the latest version of the standard and will enable billing for a host of new services that networks intend to offer their customers. Clearing house uses TAP3 protocol to exchange all the CDRs between different roaming partners. TAP3 defines how and what information on roamed usage must be passed between Network Operators. These files are exchanged using simple FTP connection. There are different versions of TAP. TAP evolved from TAPI through TAP2 and TAP2+ to TAP3. The latest release, TAP3, includes support for inter-standard roaming in a satellite ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mobile phone or other mobile device, to make and receive voice calls and text messages, browse the internet and receive emails, whilst visiting another country. IMR effectively extends the coverage of a roaming customer's home operator's retail voice and SMS services, allowing the customer to continue to use their home operator phone number, and data services while in another country. This seamless extension of coverage is enabled by a wholesale roaming agreement between a roaming customer's home operator and the visited network in the visited country, which addresses the technical and commercial components required to enable the service. IMR is one service offered to consumers within a wider market of communications services while travelling abroad. The selection of communication services while travelling includes hotel services, public / private WiFi, single SIM multiple number products, national "travel" SIMS, and visited operator SIMs, amongst others. This paper does not directly address these other services. However, these other services need to be recognised as a part of any more robust analysis of the market for communication services while travelling abroad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the Visited Operator's network, which in turn uses international transit services to carry the call back to your home country. 2. You pay a retail price to your Home Operator for the IMR service and pay nothing to the Visited Operator A Your friend does not incur any charges for receiving a call from you while you are roaming. 3. The Visited Operator A sends Transferred Account Procedure (TAP) files to a Clearing House which forwards them to your Home Operator. TAP files are used for billing of calls while roaming. 4. Your Home Operator can then pay Visited Operator A wholesale charges as per call volumes in the TAP file and rates in the wholesale roaming agreement. 5. Visited Operator A pays the International Carrier for carrying the call and handing over the call to your Home Operator. The International Carrier in turn pays your Home Operator a termination rate for terminating the call in your home country. " 1.6 Further in the presentation titled "Telecom Roaming Overview" available on https://www.slideshare.net/Shilpin-2014/telecomroaming-overview, assessed on 25.08.2022 the presenter explains the concept of international roaming by way of illustrative diagram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence shall have no applicability to the present case which is for the period after introduction Place of Provision of Services Rules, 2012. 1.10 In the present appeal we are concerned with the period after 01.07.2012 (i.e. July 2012 to September 2013). In my view the issue needs to be reconsidered for the period in respect of the of the period post 01.07.2012 on the basis of the Place of Provision of Service Rules, 2012 and Education Guide 2012 issued explaining the said provision. The decision relied upon by the Appellant and Hon'ble Member (Judicial) in her order has been passed without consideration of the facts and the provisions of law on the subject hence being sub-silentio cannot be a binding precedent for the present case. 1.11 The relevant excerpts from the Education Guide are reproduced below: 5.1 Introduction 5.1.1 What is the relevance of the 'Place of Provision of Services Rules, 2012'? The 'Place of Provision of Services Rules, 2012' specify the manner to determine the taxing jurisdiction for a service. Hitherto, the task of identifying the taxing jurisdiction was largely limited in the context of import or export of services. For this pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself may not be available e.g. services supplied electronically. As a result it is necessary to lay down rules determining the exact place of provision, while ensuring a certain level of harmonization with international practices in order to avoid both the double taxation as well as double nontaxation of services. It is also a common practice to largely tax services provided by business to other business entities, based on the location of the customers and other 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. 5.2 Basic Framework 5.2.1 How will a person determine the taxability of a service in terms of these rules? As stated earlier, in terms of section 66B, a service is taxable only when, inter alia, it is "provided (or agreed to be provided) in the taxable territory". Thus, the taxability of a service will be determined based on the place of its provision. For determining the taxability of a service, therefore, one needs to ask the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service is otherwise exempted. Following illustration will make this clear:- A company ABC provides a service to a receiver PQR, both located in the taxable territory. Since the location of the receiver is in the taxable territory, the service is taxable. Service tax liability will be discharged by ABC, being the service provider and being located in taxable territory. However, if ABC were to supply the same service to a recipient DEF located in non-taxable territory, the provision of such service is not taxable, since the receiver is located outside the taxable territory. If the same service were to be provided to PQR (located in taxable territory) by an overseas provider XYZ (located in non-taxable territory), the service would be taxable, since the recipient is located in the taxable territory. However, since the service provider is located in a non-taxable territory, the tax liability would be discharged by the receiver, under the reverse charge principle (also referred to as "tax shift"). 5.3.3 Who is the service receiver? Normally, the person who is legally entitled to receive a service and, therefore, obliged to make payment, is the receiver of a service, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocesses, including the financial and accounting process, and purchasing process. Normally, these systems will provide the required information and audit trail to identify the establishment that uses or consumes a service. It should be noted that in terms of proviso to section 66B, the establishments in a taxable and non-taxable territory are to be treated as distinct persons. Moreover, the definition of "location of the receiver" clearly states that "where the services are "used" at more than one establishment, whether business or fixed, the establishment most directly concerned with the use of the service" will be the location. Thus, the taxing jurisdiction of service, which is provided under a 'global framework agreement' between two multinational companies with the business establishment located outside the taxable territory, but which is used or consumed by a fixed establishment located in the taxable territory, will be the taxable territory. Illustration The following example illustrates the above, by comparing the place of provision of services rendered under a Global Agreement (A 'Global Contract or Agreement' is between two parent companies for prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ram F2 titled 'Scenario 1' at the end of this section. Scenario 2 [See Flow Diagram F 3 at the end of this section] AAA enters into a Framework Agreement with BBB for provision of IT services for the whole group. The Framework agreement covers the broad contours of supply between the two parties, payment milestones, obligations relating to confidentiality, penalty for default, limitations of liability and warranties etc, which would apply as and when group companies enter into separate agreements, in accordance with the terms envisaged in the framework agreement. BBB-X and BBB-Y could then enter into separate and independent business agreements with AAA-X and AAA-Y, in countries X and Y respectively, for provision of IT services. There are four agreements, but only three transactions involving provision of services, as indicated in the Flow diagram F3- Scenario 2 at the end of this section. 1.12 From the facts of the case and application of the Place of Provision of Service Rules, 2012, as explained by the Education Guide, as above, in the present case the service recipient being located in India, the place of location of service recipient will be the place of provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view of the Commissioner in the impugned order to effect that benefit of export of services is not available in the present case. I find that the decision in the Appellants own case referred to by the Learned Member (Judicial) a part of demand period is after 01.07.2012, and Tribunal has made observation for that period in para 5.2, which in my view is sub-silentio and hence cannot be a binding precedent. In view of the findings as above the appeal needs to be dismissed. (Sanjiv Srivastava) Member (Technical) 1. I have perused the separate order recorded by Learned Brother Member (Technical) Shri Sanjiv Srivastava. It would not be proper if I do not state that the materials on which Learned Brother Member (Technical) has placed reliance, as noted by him from paragraph 1.4 onwards, so as to record the difference of opinion, was not argued by either of the parties and I did not have the opportunity to get myself clarified on the observations made. I have had the privilege of seeing the same only while perusing the separate order recorded by my Learned Brother. DIFFERENCE OF OPINION 2. In view of the difference of opinion between the Members, the following questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board, after amendment to the scheme of Service Tax w.e.f. 01.07.2012, introducing the concept of negative list and notifying the Place of Provision of Service Rules, 2012 (POPS Rules, 2012, for short), was of the opinion that the judgment delivered earlier in the context of provisions prevailing the then would not be applicable to post-amendment era. He has further reasoned that the illustration provided in para 5.3.3 and 5.3.4 of the Education Guide in particular, and Rule 8 & 9 of POPS Rules, 2012, if considered, then the location of the receiver of service i.e. the international roamer, who avail the facility by consuming the services while on his visit to India irrespective of payment for such services by the FTO, who is an intermediary for payment of the consideration, being in the taxable territory of India, hence service tax is applicable to such services. 5. In the earlier judgement of the Tribunal in the appellant's own case, even though the period covered post-01.07.2012, but a finding has been recorded mentioning that the view taken consistently by the Tribunal in the appellant's own case from time to time will also be applicable for the period after 01.07.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Finance Act, 2012.- There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. By virtue of Section 66C of the Finance Act, 1994 the POPS Rules, 2012 has been notified. The said Section 66C reads as follows:- 66C. Determination of place of provision of service :-- (1) The Central Government may, having regard to the nature and description of various services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided. (2) Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory. 8. The Place of Provision of Service Rules notified vide Notification No. 28/2012-ST cit. 20.06.2012 to ascertain the location of service provider as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not your customer. When a service is rendered to a third party at the behest of your customer, the service recipient is your customer and not the third party. For example, when a florist delivers a bouquet on your request to your friend for which you make the payment, as far as the florist is concerned you are the customer and not your friend. (emphasis supplied) 10. The question now needs to be answered is: whether, after notifying the POPS Rules, 2012, the FTO is no more to be considered as the service receiver and the person who visits India and beneficiary of the said roaming service becomes the service receiver. The relevant POPS Rules, 2012 referred in the Order i.e. Rule 3, 8, and 9 read as: RULE 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. *********************************************** RULE 8. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to under the Education Guide that the lady who owns the car and leaves at the garage for servicing; later when her chauffer collects the serviced car after making payment on behalf of the lady, cannot be called the service receiver. Undoubtedly, the service receiver is the lady; not the chauffer, who makes the payment, for the simple reason that she is the person legally entitled to receive the service. In other words, the decisive factor, is the agreement between the service station and the lady for servicing the car, under which she is obliged to make the payment in consideration of the service received. The mode/medium of payment of the obliged amount may be through the Chauffer. Thus, the illustration makes it clear, to identify the service receiver, who makes the payment for the service, is a factor immaterial, but who is legally obliged to make the payment, in pursuance to the agreement for rendition of the service, is the decisive factor. Examining the issue other way round, legally, if any deficiency in the service of the car, the lady can proceed against the service provider and not the chauffer who has made the payment on behalf of the lady, while taking delivery of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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