Export of Service Rules protect foreign-currency service receipts, supporting waiver of pre-deposit and stay of recovery

Services rendered from India to a foreign recipient, with consideration received in convertible foreign exchange, were treated as prima facie covered by the Export of Service Rules, 2005. On that basis, the Tribunal considered the service tax demand not immediately recoverable and, relying on the Larger Bench ruling in Paul Merchants Ltd., granted full waiver of pre-deposit and stayed further recovery proceedings pending disposal of the appeal. The operative point is that receipt of foreign exchange for services supplied to a foreign company can justify interim protection against enforcement where the export-of-service position is prima facie established.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and stay of recovery in view of the prima facie applicability of the Export of Service Rules, 2005.

Analysis: The dispute concerned levy of service tax on services rendered from India to a Singapore company, with consideration received in convertible foreign exchange. The receipt of foreign exchange was not in dispute. The Tribunal noted that, on a prima facie view, the matter was covered by the Larger Bench decision in Paul Merchants Ltd., where a substantially similar factual matrix was held to fall within the Export of Service Rules, 2005 so as to immunize the liability to service tax.

Conclusion: The appellant was granted full waiver of pre-deposit and all further proceedings for recovery of the adjudicated liability were stayed pending disposal of the appeal.

Ratio Decidendi: Where services are prima facie shown to have been provided to a foreign recipient and consideration is received in convertible foreign exchange, the appellant may be entitled to interim protection from recovery pending appeal.

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