Tribunal allows appeal for reexamination of service classification as "export of service"

The Tribunal allowed the appeal by way of remand, directing a fresh examination of all issues involved and the classification of services as "export of service." The stay application was also disposed of. The Tribunal found that the offshore services rendered by the appellant to TDCVL qualified as "export of service" under Rule 3(2)(a) of the Export of Service Rules, 2005.

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Issues involved:
1. Liability to pay Service Tax on services rendered abroad.
2. Classification of services as onsite and offshore.
3. Applicability of Reverse Charge Mechanism.
4. Consideration for services received in convertible foreign exchange.
5. Whether services rendered qualify as "export of service" under Rule 3(2)(a) of the Export of Service Rules, 2005.

Detailed Analysis:
1. The appellant, engaged in providing software services, entered into a tripartite agreement for SAP software implementation in Korea. The department demanded Service Tax under Reverse Charge Mechanism. The appellant argued that since services were rendered in Korea, they are not taxable in India, and VAT/GST liability was discharged in Korea.

2. The services provided had two components - onsite and offshore. The appellant contended that offshore services, rendered by them to a foreign entity in Korea, should be considered as "export of service" as they received consideration in convertible foreign exchange. They argued that Section 66A does not apply as there was no service receipt in India.

3. The Revenue maintained that the appellant must pay Service Tax under Reverse Charge Mechanism as services were rendered by TTL Korea to the appellant, and consideration was received from TDCVL. The Tribunal noted that the service recipient was TDCVL, and VAT/GST liability was discharged in Korea.

4. The Tribunal referred to a clarification by C.B.E. & C. in a similar case, stating that onsite services rendered abroad are not treated as services provided from India. It was emphasized that subjecting such transactions to Service Tax in India is not applicable.

5. The Tribunal found that the offshore services rendered by the appellant to TDCVL qualified as "export of service" under Rule 3(2)(a) of the Export of Service Rules, 2005. The conditions for export were satisfied, and the matter required fresh consideration by the adjudicating authority. The appellant was directed to provide evidence of VAT liability discharge in Korea.

In conclusion, the Tribunal allowed the appeal by way of remand, directing a fresh examination of all issues involved and the classification of services as "export of service." The stay application was also disposed of.

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