Export of service classification upheld where order-procurement benefit accrued to the foreign client outside India.

Procurement of orders in India for a Japanese foreign client, with commission received in convertible foreign exchange, qualified as export of service under Rule 3(2)(a) because the service was provided from India and used outside India. The effective benefit accrued to the foreign client in Japan, and the fact that the goods were ultimately supplied to customers in India did not change the character of the service. The refund of service tax was therefore correctly allowed.

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Issues: Whether the services of procuring orders and transmitting them to a foreign client constituted export of service under Rule 3(2)(a) of the Export Service Rules, 2005, so as to entitle the assessee to refund of service tax paid.

Analysis: The assessee procured purchase orders from Indian customers for its holding company in Japan and received commission in convertible foreign exchange. The relevant test under Rule 3(2)(a) is whether the service is provided from India and used outside India, coupled with receipt of payment in convertible foreign exchange. The effective benefit of the marketing and order-procurement activity accrued to the foreign client in Japan, and the fact that the goods were ultimately supplied to customers in India did not alter the character of the output service. The circular on export of services clarified that, for such services, the place where the benefit accrues and the location of the service receiver are the material factors.

Conclusion: The service amounted to export of service and the refund claim was correctly allowed.

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