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TMI Blog2025 (2) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... nually.Upon intimation from the Income Tax Department, it was noticed that the appellant had received certain payments on which TDS was deducted, but no service tax was paid. Inquiring into the nature of payments, the Department noted that the payments were received in foreign currency as annual fees from JCB UK against advisory services rendered by the Appellant to JCB UK. Documents in the nature of appointment letters, terms and conditions of appointment, sample invoices, renewed appointment letters, etc. were furnished by the Appellant. The appellant also submitted that the amounts received from JCB UK were not susceptible to service tax as advisory services were exported by the appellant to JCB UK. Thereafter, a show cause notice was issued to the appellant dated 26.03.2020 proposing to demand service tax of Rs. 27,17,073/- on consultancy services provided by the appellant for JCB companies in India, alleging that the meetings were held in Delhi or Pune. It was also alleged that none of the provisions under Rule 4 to 12 of the Place of Provision of Service Rules, 2012 [POPS Rules] cover the services provided by the appellant JCB UK, as an export of service, since the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In such a case, the ld. counsel submitted that 'location of the recipient of service' for purposes of Rule 3 would be England, UK, which is outside the taxable territory of India. Hence, services provided to JCB UK would not have any service tax implication.At this juncture, it is submitted that the impugned order, order-in-original and the show cause notice have incorrectly proceeded to determine the place of provision of service by analysing the place where the services have been used and for the purposes of Rule 3 of the POPS Rules, which has been applied by the Department, there is no requirement to determine place of utilization or consumption of service. 3.1. Further, the ld. counsel submitted that service tax is a contract-based levy and the charging provisions under Section 66B and the definition of 'service' under Section 65B (44) refer to an activity carried out by one person for another for consideration. The service provider is engaged contractually by the service recipient to receive services. The provision and use of service, thus, has to be seen in terms of the understanding between the service provider and the service recipient and the use of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 67A of the Act and the POT Rules, makes clear that the Service Tax rate on a provision of service is applicable at the time of point of taxation thereof. Under Rule 3 of the POT Rules, the point of taxation of a service shall be earliest of (a) date of issuance of invoice, (b) date of receipt of payment, and (c) provision of service. It may be noted that in 2015-16, the appellant raised its invoice on 01.05.2015. The said payment was received from JCB UK on 02.11.2015). The services were provided during the entire year. The point of taxation, therefore, should be the date of invoice, which is the earliest of the three events, i.e. 01.05.2015. The rate of Service Tax applicable on 01.05.2015 was 12.36%. However, for 2015-16, the impugned order has incorrectly calculated the demand of Service Tax of Rs. 8,37,201/- by applying rate of Service Tax as 14.5%.Similarly, in 2016-17, the appellant raised its invoice on 01.05.2016. The said payment was received from JCB on 01.11.2016. The point of taxation, thus, shall be the date of invoice, which is the earliest of the three events, i.e. 01.05.2016. The rate of Service Tax applicable on 01.05.2015 was 14.5%.Similarly, for 2016-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce provider would be joining the JCB Indian Advisory Council to help and advice JCB on their aspirations for their companies in India. Thus, in the wordings appointment letter clearly establishes that the service provider was engaged in the Indian Advisory Board of the Company and all the service provided by the service provider were to be utilized for the companies of JCB situated in India. Thus, the actual place of use and utilization of the services so provided by the service provider were in India. The letter has clearly stipulated that the meetings would be held in either Delhi or Pune. Thus, it was clear that the service provided was for the business establishments of JCB in India and even the meetings were to be held in India. 4.1 Further, the ld. AR submitted that the above acceptance letter given by the service provider it is evident that he was joining the JCB Indian Advisory Council for the development plans in India. Thus, from the combined reading of the offer of appointment letter dated 15.03.2007 by JCB England which was issued to the service provider for joining the JCB Indian Advisory Council and to held and advice JCB on their aspirations for their companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exchange. (iii) JCB (UK) is incorporated in U.K. 7. In this context, it would be relevant to identify the place of provision of service, and thereafter determine whether the conditions for export stipulated under Rule 6A of the ST Rules have been satisfied. We note that as per the SCN and the consequent orders, the Appellant had rendered services which have been consumed in India. Accordingly, it has been alleged that the place of provision of service is in India. The Appellant is contending otherwise and is treating the services provided as exports. 8. We note that Rule 3 of POPS Rules provides for the general rule for determination of place of provision of services. Rules 4 to 12 provide for determination of place of provision of services specified thereunder. The show cause notice and the adjudication orders have ruled out the applicability of Rule 4 to 12 of the POPS Rules. The service tax demand has been raised by determining the place of provision of subject services under Rule 3 of the POPS Rules. In order to appreciate the issue, it would be appropriate to reproduce the said rule:- "RULE 3. Place of provision generally. The place of provision of a service shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the laws of United Kingdom and is located in United Kingdom. Therefore, the UK office of JCB would qualify as its business establishment where decisions pertaining to the company are taken. Consequently, the services rendered by the Appellant would be considered as received at the 'business establishment of JCB UK' in terms of Rule 2(i)(b)(i) of the POPS Rules. Accordingly, the 'location of the recipient of service' for purposes of Rule 3 would be United Kingdom, which is outside the taxable territory of India. 12. We now address the second issue as to whether the service rendered quantifies as "Export of Service". We reproduce the relevant rule in this regard:- "Rule 6A of the Service Tax Rules, 1994: (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory, (b) the recipient of service is located outside India, (c) the service is not a service specified in the section 66D of the Act, (d) the place of provision of the service is outside India, (e) the payment for such service has been received by the provider of service in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Indian customers. For this provision of service, Arcelor India receives consideration from Arcelor France in convertible foreign exchange. Thus, there exists a relationship of service provider and service recipient between Arcelor India and Arcelor France. 48. A service recipient is a person who makes a request for a service, in exchange of a consideration. In fact, he is the person who is liable to pay for the services received. Service recipient is not a person who is affected by the performance of the service. The Finance Act does not define the term "service recipient. However the same has been clarified in the CBEC Education Guide as follows: "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, whether or not he actually makes the payment or someone else makes the payment on his behalf." 49. It is, therefore, clear that the recipient of service is the person at whose desire the activity is done in exchange for a consideration, i.e., the person who is obliged to make payment for the service. The recipient of service would, therefore, be a person at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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