Export of service in SEZ disputes turns on foreign exchange receipt and where the service is treated as used.

Foreign exchange receipt and prima facie overseas enjoyment of management, maintenance or repair services supplied from an SEZ unit to foreign-owned marine vessels supported export treatment for the pre-27.02.2010 period, because the service was treated as used outside India despite being performed in India. After the amendment effective from 27.02.2010, the regime required performance outside India, so the same service rendered within India was treated as apparently sustainable for demand purposes. On that basis, conditional interim relief was granted and the appellant was required to make a predeposit of Rs. 1 lakh, with stay of the balance demand subject to compliance.

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Issues: (i) whether the service of management, maintenance or repair supplied from the SEZ unit to foreign-owned marine vessels could prima facie be treated as exported service; and (ii) whether, in view of the amendment to the export of service regime with effect from 27.02.2010, the appellant was required to make a predeposit and obtain stay only on compliance.

Issue (i): whether the service of management, maintenance or repair supplied from the SEZ unit to foreign-owned marine vessels could prima facie be treated as exported service.

Analysis: The consideration for the service was received in foreign exchange. The repairs and maintenance were carried out in India, but the benefit of the service accrued to the recipient only when the vessels were on voyage. On that basis, the condition that the service, though rendered in India, should be shown to have been used outside India was treated as prima facie satisfied.

Conclusion: The service was held to be prima facie exportable for the period prior to the amendment.

Issue (ii): whether, in view of the amendment to the export of service regime with effect from 27.02.2010, the appellant was required to make a predeposit and obtain stay only on compliance.

Analysis: The amended regime was treated as adverse because, after 27.02.2010, the service had to be performed outside India to qualify as exported service. As the service in question was admittedly performed within India, the demand for the post-amendment period was treated as apparently sustainable. In that context, the provision relating to penalty was considered while fixing the quantum of predeposit.

Conclusion: The appellant was directed to predeposit Rs. 1 lakh, and stay of the balance demand was granted subject to compliance.

Final Conclusion: Interim relief was granted only to the extent of the balance demand, while the appellant was required to secure the apparently sustainable portion by predeposit.

Ratio Decidendi: For interim relief in a service-tax export dispute, foreign exchange receipt and prima facie overseas enjoyment of the service may support export treatment for the pre-amendment period, but where the amended rule requires performance outside India, the demand for the post-amendment period can justify a conditional predeposit.

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