2008 (6) TMI 47 - AT - Service Tax

CESTAT exempts international courier services from tax under Export of Services Rules

The Appellate Tribunal CESTAT, Chennai, ruled in favor of the appellant, M/s U. B. Xpress (South) (P) Ltd, holding that international courier services ... Export of Services Rules, 2005 - export of taxable service - Courier Service - taxable service partly performed outside India treated as performed outside India - exemption from service tax on exported servicesExport of Services Rules, 2005 - Rule 3 - Rule 4 - Courier Service - exemption from service tax on exported services - Whether the appellant's international courier services for the period in question were taxable or exempt as exported services under the Export of Services Rules, 2005. - HELD THAT: - The Tribunal examined Rule 4 of the Export of Services Rules, 2005 which permits export of services taxable under clause 105 of Section 65 to be exported without payment of service tax, and Rule 3 which provides that specified taxable services, including courier service, if partly performed outside India shall be considered to have been performed outside India. Applying these provisions to the facts that each transaction involved performance partly in India and partly outside India, the Tribunal held that such international courier services fell within the definition of export of taxable service and therefore were not liable to service tax. The Tribunal also noted and followed earlier judicial authority adopting the same construction of the Rules.Impugned order affirmed by the original authority set aside; appeal allowed and demand, penalties and consequential recovery set aside for the period in question.Final Conclusion: The appeal is allowed and the demand, penalties and recovery in respect of the international courier services rendered during the stated period are set aside as such services qualify as exported services under the Export of Services Rules, 2005 and are not liable to service tax. Issues:Waiver of predeposit and stay of recovery of service tax demand along with penalties under various sections of the Finance Act, 1994 for international courier services provided by the appellant.Analysis:1. Waiver of Predeposit and Stay of Recovery:The application was filed by M/s U. B. Xpress (South) (P) Ltd seeking waiver of predeposit and stay of recovery of a service tax demand of Rs. 1,37,920/-, along with penalties imposed under Sections 76, 78, and 75 of the Finance Act, 1994. The impugned order affirmed the decision of the original authority. After hearing arguments from both sides, the requirement of predeposit was waived, and the appeal was taken up for final disposal.2. Tax Liability for International Courier Service:The appellant provided international courier services falling under the category of 'Courier Service'. The issue arose when the appellant did not pay service tax for the period between 15.03.05 to 16.06.05. The Commissioner held that the service provided by the appellant, involving transport and delivery of articles and documents abroad, could not be considered as partly rendered in India and partly abroad, leading to a tax liability on the international courier service.3. Interpretation of Export of Services Rules, 2005:The appellant's counsel argued that as per Rule 3 of the Export of Services Rules, 2005, export of taxable services, including 'Courier Service,' could be exempt from service tax if partly performed outside India. The counsel also referred to a previous Tribunal order and a decision in M/s. TNT India Pvt. Ltd. Vs. Commissioner of Service Tax, Bangalore, which supported the exemption under Rule 4 of the Export of Services Rules, 2005.4. Judicial Interpretation and Decision:The Tribunal analyzed the statutory provisions under Rule 4 of Export of Services Rules, 2005, and concluded that the appellant was not liable to pay service tax on international courier services where part of the service was performed outside India. Relying on the judicial authority cited by the appellant's counsel, the Tribunal set aside the impugned order, allowing the appeal and disposing of the stay application.In conclusion, the Appellate Tribunal CESTAT, Chennai, in the case of M/s U. B. Xpress (South) (P) Ltd, ruled in favor of the appellant, holding that international courier services involving partial performance outside India were exempt from service tax under the Export of Services Rules, 2005. The decision highlighted the importance of statutory provisions and judicial interpretations in determining tax liabilities for cross-border services.