9911796707
TMI Blog2024 (11) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... progress reports of segregation and internal shifting to the service recipient i.e. foreign based principals. Therefore, the progress report is also indeed a part of over all part of important service activity without which the service provided by the appellant would not complete. From the above sub rule (ii) of Rule 3 of export of service rules, 2005 it is clear that the service falling under sub clause (zn) and (zr) which are subject matter of the present case, if partly performed outside India it shall be considered as performed outside India. In the present case as discussed above, the progress report was sent to the foreign principals which is the part of the overall service. Hence, the service is partly performed outside India, therefore, it qualifies as export of service in terms of Rule 3 (ii) of Export of Service Rules, 2005. In the identical facts where the service was performed in India but the reports of the sad service was sent to the foreign service recipient wherein it was held that performance of service not completed until progressive/analysis report delivered to the client. Delivery of report being essential part of service made outside India and used outside Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before giving delivery to the respective importers. 1.2 The foreign shipping line had appointed the appellant to provide the service of segregation and internal shifting on their behalf to facilitate proper delivery of imported timber logs to the importers. Pursuant to the above the appellant had provided to foreign principals with service of segregation and internal shifting and submitted daily/progressive reports of delivery and raised final invoices in foreign convertible currency. The appellant was also roped in by the same foreign principals for clearing up the vessels that brought in imported timber logs by removing the timber bar from hatches once discharge was completed so that the vessel can be readied for the next voyage. The appellant provided this service involving clearing of hatches by removal of timber bar and submitted bills in foreign convertible currency after submitting completion reports to the principals. The appellant had neither collected nor paid service tax on the above service believing that they had provided service to foreign principals, hence it was an export of service. The department issued a show cause notice demanding service tax, interest and impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritime, 2010 (17) S.T.R. 346 (T) Western India Shipyard Ltd., 2008 (12) S.T.R. 550 (T) Vikram Ispat, 2008 (11) S.T.R. 639 (T) VBC Exports Ltd., 2008 (10) S.T.R. 613 (T) Kei-rsos Maritime Ltd., 2008 (11) S.T.R. 412 (T) 3. Shri M.P Solanki, Learned Assistant Commissioner (AR)appearing on behalf of the Revenue reiterates the finding of the impugned order. 4. We have carefully considered the submission made by both the sides and perused the records. We find that the appellant have carried out the job of segregation and internal shifting of timber logs on behalf of foreign based principals as part of their obligation but also the appellant have sent progress reports of segregation and internal shifting to the service recipient i.e. foreign based principals. Therefore, the progress report is also indeed a part of over all part of important service activity without which the service provided by the appellant would not complete. In this regard we refer to the definition of export of taxable service under Export of Service Rules, 2005 which reads as under:- 3. Export of taxable service. (1) Export of taxable services shall, in relation to taxable services (i) specified in sub-clauses (d), ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is provided to a recipient located outside India, then such taxable service shall be treated as export of taxable service subject to the condition that the tangible goods supplied for use are located outside India during the period of use of such tangible goods by such recipient (2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely:- (a) [* * * ] (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 installation structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof. 4.1 From the above sub rule (ii) of Rule 3 of export of service rules, 2005 it is clear that the service falling under sub clause (zn) and (zr) which are subject matter of the present case, if partly performed outside India it shall be considered as performed outside India. In the present case as discussed above, the progress report was sent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e performance is not complete until the testing and analysis report is delivered to the client. In the present case, when such reports were delivered to the clients outside India, it amounts to taxable service partly performed outside India. The performance of the taxable service has no validity/sanctity unless its report is submitted to the service receiver/client. The clients do not have any value for merely performance if no report is delivered to them. Consideration of the service is received by the appellants only when they deliver the study report and the certificate of the testing and analysis of the clinical trials conducted by them. Thus, delivery of the report is an essential part of their service and the service is not complete till they deliver the report. The report is delivered outside India and the same is used outside India. These facts also fortify the views taken hereinabove that the service provided by the appellants was export of service and I am inclined to them such taxable service as export of service and therefore not taxable. 10. From the above provision it is clear that the said services came under Rule 3(1)(2) (sic) of the Rules. It is very much clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rose whether the appellant provided Business Auxiliary Service [under Section 65(105)(zzb) of the Finance Act, 1994] to their foreign clients and whether the transaction could be treated as export of service . In this context, the Tribunal referred to the Board s Circular as contained in Circular No. 111/5/2009-S.T. ibid, which was to this effect : the phrase used outside India is to be interpreted to mean that the benefit should accrue outside India. Thus, it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefit of these services accrued outside India. What is accrued outside India is the benefit in terms of promotion of business of a foreign company. In the said case, the Bench found this clarification of the Central Board of Excise Customs to be in conformity with the Rules 2 and 5 of the Export of Services Rules, 2005. After discussing the transactions, it was held that the provision of service was complete only when the purchase orders canvassed by the appellant in India were received by the foreign companies. Foreign companies were found to have obtained the benefit of the services by acting upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification No. 6/99-S.T. This clarification is certainly binding on the Revenue. Consequently, it has to be held that the reinstatement of the above exemption through Notification No. 21/2003-S.T., dated 20-11-2003 cannot detract from the correct legal position clarified by the Board. For this reason, we hold that there can be no demand of service tax on the appellant on the ground that exemption Notification No. 6/99-S.T. was withdrawn in March 2003 and identical exemption was reintroduced in November 2003. As a matter of fact, none of the notifications referred to export of services . Again, as a matter of fact, the Central Board of Excise Customs held export of services to be tax-free notwithstanding the notifications. The law which categorically exempted export of services from payment of service tax was brought into force for the first time through the Export of Services Rules, 2005. Undoubtedly, the period of demand, in the present case, is prior to 2005. 9. The view taken hereinbefore is supported by the judgment of the Hon ble Supreme Court in All India Federation of Tax Practitioners case (supra), wherein it was held that service tax was a destination-based consumption ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be sustained. For this reason, as well, the Appeal deserves to be dismissed. 16. We have with the assistance of the learned Counsel appearing for the parties, perused the memo of Appeal and all annexures thereto, including the impugned order. We have also perused the relevant statutory provisions, notifications and decisions brought to our notice. 17. The Tribunal was considering the respondents challenge to the order of the adjudicating authority confirming the demand and penalty. The argument before the Tribunal on behalf of the respondent was that the respondent is a testing agency. The contract of service was with the overseas purchaser of goods. Thus, the privity of contract of the respondent is with the buyers of the goods who are located or situated outside India. Further, the argument was that this is a contract based tax. The contract is of services. There is no contract in this case with the manufacturer of goods in India. Further, there is no contract and no privity between the respondent and the exporter of the goods who is stated to be based in India. It is in these circumstances that the exemption notification though required to be strictly construed has rightl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, the payment was also made in terms aforesaid, then, the benefit of the notification at page 17 of the paper book was available. That was on the footing that the services rendered were exempt from whole of the liability to pay Service Tax. 22. The circular dated 25th April, 2003 (Annexure A2) is issued on the subject of non-levy of Service Tax on export of services. It has referred to earlier circular of 1st March, 2003 and 9th April, 1999. The 9th April, 1999 is a notification of exemption. The April 2003 circular clarifies that Service Tax would be levied on all taxable services consumed or rendered in India, irrespective whether the payment thereof is received in foreign exchange or not. Since representations were received by the Board with regard to the withdrawal of the Notification No. 6 of 1999, exports of service would be affected as it would be costlier in the international market, that the board clarified that service consumed/provided in India in the manufacture of goods which are ultimately exported, no credit of Service Tax paid can be availed or reimbursed till April, 2003 because inter-sectoral tax credit between service and goods are not allowed. Mr. Sridharan ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the clients located abroad intended to import from India. In other words, the clients abroad were desirous of confirming the fact as to whether the goods imported complied with requisite specifications and standards. Thus, client of the respondent located abroad engaged the services of the respondent for inspection and testing the goods. The goods were tested by the respondents in India. The goods were available or their samples were drawn for such testing and analysis in India. However, the report of such tests and analysis was sent abroad. The clients of the respondent were foreign clients, paid the respondent for such services rendered, in foreign convertible currency. It is in that sense that the Tribunal holds that the benefit of the services accrued to the foreign clients outside India. This is termed as export of service . In these circumstances, the Tribunal takes a view that if services were rendered to such foreign clients located abroad, then, the act can be termed as export of service . Such an act does not invite a Service Tax liability. The Tribunal relied upon the circulars issued and prior thereto the view taken by it in the case of KSH International Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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