2007 (3) TMI 33 - AT - Service Tax

Tribunal rules in favor of Courier Agency on service tax for export, clarifies 'export of service'

The Tribunal ruled in favor of the appellant, a Courier Agency Services provider, in a case concerning the applicability of service tax on the export of ... Export of services - Export without payment of service tax - Proviso to Rule 3 of the Export of Services Rules, 2005 - Rule 4 of the Export of Services Rules, 2005 - Destination based consumption tax - Board's Circular F. No. 341/34/2005-TRU dated 3-10-2005 - Board's Circular No. 56/5/2003-S.T. dated 25-4-2003Export of services - Proviso to Rule 3 of the Export of Services Rules, 2005 - Rule 4 of the Export of Services Rules, 2005 - Destination based consumption tax - Board's Circular F. No. 341/34/2005-TRU dated 3-10-2005 - Board's Circular No. 56/5/2003-S.T. dated 25-4-2003 - Whether the courier services exported and delivered abroad by the appellant constitute 'export of services' and are prima facie not leviable to service tax such that pre-deposit and recovery should be stayed. - HELD THAT: - The Tribunal examined the definition of 'export of service' under the Export of Services Rules, 2005 and the proviso to Rule 3 which provides that where a taxable service is partly performed outside India it shall be considered to have been performed outside India. It noted undisputed facts that the goods were taken out of India following procedures and that the service recipients were located abroad. The Tribunal held that Board's Circular F. No. 341/34/2005-TRU dated 3-10-2005 was inapplicable because that Circular applies where both the service provider and service recipient are in India and the service is provided in India; in the present case the recipient is abroad and therefore the Circular was misapplied by the Commissioner. The Tribunal also relied on Board's Circular No. 56/5/2003-S.T. dated 25-4-2003 which explains that service tax is a destination-based consumption tax and export of services is not subject to service tax. Applying these provisions and clarifications, the Tribunal concluded that, prima facie, the appellants' exported courier services fall within the export of services and are not leviable to service tax.Prima facie finding of export of services; tax not leviable and stay granted with full waiver of pre-deposit and stay of recovery until disposal of the appeal.Final Conclusion: The Tribunal granted stay of demand and waived pre-deposit after concluding prima facie that the appellant's courier services constituted export of services not liable to service tax, observing that the proviso to Rule 3 and relevant Board circulars support non-levy and that the Revenue had misapplied the Board's 2005 circular. Issues:1. Applicability of service tax on export of courier services.Analysis:The appellant, a Courier Agency Services provider, was asked to pre-deposit a substantial amount of service tax and penalty under the Finance Act, 1994. The issue revolved around whether the appellant was liable to pay service tax for exporting courier services. The Revenue argued that since the appellant collected fees from clients in India, the services were deemed to have been performed in India. However, the appellant contended that if a service is partly performed outside India, it should be considered as performed outside India. The appellant relied on specific provisions and circulars to support their argument that service tax is not applicable on the export of services. They highlighted that the service recipient was abroad, not in India, making the Board's Circular cited by the Revenue inapplicable. The Tribunal noted that once goods are taken out of the country, export is deemed to have taken place, and even partial export outside India should be considered as performed outside India. The Tribunal agreed with the appellant's interpretation of the rules and circulars, granting a full waiver of the pre-deposit amount and staying its recovery until the appeal's disposal. The case was listed for an expedited hearing due to the significant revenue implications.This judgment clarifies the interpretation of the term 'export of service' in the context of courier services and the applicability of service tax. It emphasizes the importance of considering specific provisions and circulars to determine tax liability on exported services. The Tribunal's decision to grant a waiver and expedite the appeal hearing reflects the complexity and substantial financial implications of the case.