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TMI Blog2024 (1) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... x Rules. This point also has been considered, while the High Court rendered the judgement. Therefore, in the present case where the period is question in April 2004 to March 2009 and Rule 6A has no application, the decision of this case law is not relevant to the facts of the present case. In the present case, the service provided by the appellant falling under Section 65 (105) (zzg), is specifically mentioned at Export of Services Rules, 2005, Rule 3 (1) (ii). Under this Rule, even if the service is partly provided abroad, the same is to be treated as export of service. In the present case, admittedly, the repairs and maintenance service has been carried out for their Nepal based clients at Nepal only. Therefore, this condition is getting fulfilled. The condition of receiving the proceeds in convertible foreign exchange is a mandatory condition and not a procedural one. During the period under discussion, the Tribunals and High Courts were consistently holding that while mandatory condition is required to be fulfilled without any deviation, the procedural lapses, if any, can be condoned - in the present case, the appellant has not fulfilled the Condition of receiving the proceeds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal period is set aside. Appeal allowed in part. X X X X Extracts X X X X X X X X Extracts X X X X ..... sides. 6. We first take up the first ground taken up by the appellant, viz., that the Service was provided outside the territory of India and hence in terms of Section 64, no Service Tax liability accrues. The case laws cited have also been considered. 7. The relevant portions of statutory provisions and case law cited by the appellants are extracted below : The Finance Act 1994 : SECTION 64. Extent, commencement and application -. (1) This Chapter extends to the whole of India except the State of Jammu and Kashmir. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. (3) It shall apply to taxable services provided on or after the commencement of this Chapter. SECTION 65B. Interpretations. -- In this Chapter, unless the context otherwise requires,-- (52) "taxable territory" means the territory to which the provisions of this Chapter apply; SECTION 94. Power to make rules. -- (1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Chapter. (2) In particular, and without prejudice to the generality of the foregoing power, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 8. Before drawing any conclusion about the applicability or otherwise of the above provisions, it would be material to go through the facts and outcome of the cited case law : Indian Association of Tour Operators Vs UOI-2017 (5) G.S.T.L. 4 (Del.) 9. On the strength of Sections 93 and 94(2)(f) of the FA, the Central Government issued the Export of Services Rules, 2005 ('ESR, 2005'). Rule 3(1)(ii) ESR, 2005 inter alia stated that "export of taxable services shall in relation to taxable services specified in sub-clause (n) of clause (105) of Section 65 of the Act, be provision of such services as are performed outside India". The proviso thereto stated that where such taxable service is partly performed outside India, "it shall be treated as performed outside India." 10. Rule 3(2) of ESR, 2005 initially stated that the provision of any taxable service specified in Rule 3(1) shall be treated as export of service when the following conditions are satisfied, viz.: (a) such service is de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in accordance with item (b) of Explanation 3 of clause (44) of Section 65B of the Act Where any service is exported, the Central (2) Government may, by notification, 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." 15. The resultant position, prior to 1st July, 2012, as far as export of tour operator services was that even if a part thereof was performed outside India and the remaining in India, it would still be treated as having been performed outside India and thereby be construed as an export of service. Such export of tour operator service was not exigible to Service Tax. This position continued till 1st July, 2012. 9. In this case, the issue was that of sustainability or otherwise of Rule 6A of the Service Tax Rules, coming into effect from 1.7.2012, which was challenged by the Petitioners. The service in question was being provided by the service provider located in India, to Indian clients wherein part of the service was rendered to these cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the mark up charges accruing to the appellant when cardholder uses card to pay in foreign exchange abroad is not liable to service tax under 'Credit Card Services' during the impugned period. This conclusion is based both on merit of scope of 'Credit Card Services' during relevant period and lack of territorial jurisdiction of charge. 11. In this case, the issue was that of the Indian service provider [SBI], issuing Credit Card to their Indian clients and tax liability or otherwise for the services received by the cardholder overseas. Since the facts are totally different, we are not required to consider the applicability of this case law. 12. Now first coming to the statutory provision of Section 64 (1), it reads as under : SERVICE TAX ACT Chapter V of the Finance Act, 1994 SECTION 64. Extent, commencement and application -. (1) This Chapter extends to the whole of India except the State of Jammu and Kashmir. 13. Section 64 is the first Section under Finance Act 1994. It is in the nature of Preamble stating the jurisdiction of the subsequentl Sections of the Act. It rightly states that it is applicable for the services provided within India [excluding the State of J & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent Sections right from their legality, applicability to litigation policy etc. 20. So far as the Export of Services are concerned, in order to ensure that the service providers do not end up paying the Service Tax when the services are exported, thereby losing the international competitiveness, Export of Services Rules, 2005 have been framed under the Finance Act, 1994. These Rules have been framed to completely exempt the Service Tax payment. The Cenvat Credit Rules 2004, have been framed to grant Cenvat Credit for the inputs, input services and capital goods, so as to avoid the cascading effect of Taxation. All these years, the assesses exporting services have been availing the Rebate/Cenvat benefits had no qualms whatsoever. In such a situation, this argument of the Appellant about non-applicability of Service Tax provisions is not only far fetched but also has no legal legs to stand on. 21. Therefore, we are not inclined to accept the argument of the appellant that when the service is provided to an entity situated in foreign territory, Service Tax provisions would not apply in view of Section 64 (1). Finding no merits in such a submission, we reject this argument fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all 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 is received by the service provider in convertible foreign exchange. Explanation. - For the purposes of this rule "India" includes the designated areas in the continental shelf and Exclusive Economic Zone of India as declared by the notifications of the Government 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.] 4. Export without payment of service tax. - Any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax. 5. Rebate of service tax. - Where any taxable service is exported, the Central Government may, by notification, grant rebate of service tax paid on such taxable service or service tax or duty paid on input services or inputs, as the case may be, used in providing such taxable service and the rebate shall be subject to such conditions or limitations, if any, and fulfilment of such procedure, as may be specified in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments due for exports from India and other payments in a manner conforming to the methods of payment indicated below: Group Permitted methods (i) All countries other than those listed under (ii) below (a) Payment in rupees form the account of a bank situated in any country in this Group (b) Payment in any permitted currency (ii) Member countries in the Asian Clearing Union (except Nepal) (a) Payment for all eligible current transactions by debit to the ACU dollar account in India of a bank of the participating country in which is resident or by credit to the ACU dollar account of the authorised dealer maintained with the correspondent bank in the other participating country. (b) Payment in any permitted currency in other cases Permitted Methods of Payments 2.6 Authorised dealers should make remittances from India or provide reimbursement to their overseas branches and correspondents in foreign countries (other than Nepal and Bhutan): against payments due for imports into India and other payments in a manner conforming to the methods of payment indicated below: Group Permitted methods (i) All countries other than those listed under (ii) below (a) Payment in rupees t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of demand. 33. Next we take up the argument of the appellant on the time bar issue. We find that admittedly, the appellants are registered as service provider. The sample copy of the ST 3 Returns shows that they have shown the turnover for Nepal transactions under the Heading 'Amount billed for exported services without payment of tax'. From the Invoices, it is seen that they have not charged any Service Tax on the Nepal service recipients. The appellants have, in fact fulfilled the first condition of Export of Services Rules, 2005 by rendering the same fully at Nepal. Therefore, they can be said to have entertained bonafide belief that no Service Tax is payable. All the documentary evidence shows that they have declared all the transactions in their books of accounts, ST 3 Returns and Income Tax Returns. Hence, far from the allegation of suppression with an intent to evade, the appellants have come clean with their proper filing of ST 3 Returns and other statutory Returns. Hence, we hold that the confirmed demand for the extended period is legally not sustainable. Hence, we set aside the confirmed demand for the extended period. However, they are required to pay the Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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