2017 (6) TMI 117 - AT - Service Tax

Manpower agency's foreign services deemed export, exempt from tax

M/s. Continental Mercantile Corporation Versus Commissioner of Service Tax, Mumbai-I

M/s. Continental Mercantile Corporation Versus Commissioner of Service Tax, Mumbai-I - TMI Issues:Determining whether services provided abroad qualify as export of service for service tax exemption.Analysis:The case involved a dispute regarding the classification of services provided abroad by an appellant engaged in manpower recruitment agency services, concerning the applicability of service tax. The appellant contended that services provided abroad should be considered as export of service, thereby exempt from service tax. The department argued that certain criteria, such as the submission of DFRC and receiving payment in foreign currency, were not met, leading to the demand for service tax.Upon review, the Tribunal analyzed the facts and legal provisions. The appellant demonstrated that services were indeed provided abroad, with payments received in both foreign exchange and Indian Rupees through foreign banks. Citing the case of Sun-Area Real Estate Pvt Ltd, the Tribunal emphasized that payments in Indian Rupees through foreign banking channels qualify as convertible foreign exchange.The Tribunal disagreed with the department's stance, highlighting that the essential requirement for export of service is receiving payment in convertible foreign exchange. The absence of DFRC was deemed a procedural issue that should not negate the export status. Therefore, the Tribunal concluded that services provided abroad, with payments in foreign exchange or Indian Rupees through foreign banks, met the criteria for export of service, warranting exemption from service tax.In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeal, determining that the services provided abroad qualified as export of service and were not subject to service tax. The judgment was pronounced on 03.05.2017.