2017 (6) TMI 428 - AT - Service Tax

Tribunal grants appeal, emphasizes export conditions & foreign exchange receipt, minimal impact from classification issue.

The Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellants. The judgment emphasized the ... Export of services - service receiver situated outside india - Whether the amount payable to the appellant by the service receiver situated outside India, but paid by the ONGC (ONGC awards contracts for Oil & Gas exploration to the principal of the Appellant), whether amounts to receipt of consideration in convertible foreign exchange, so as to qualify as export of service? - Held that: - in the terms of J.B. Boda [1996 (10) TMI 70 - SUPREME Court], the facts are squarely covered, where it was held that even if less remittances is sent outside amounts to receiving of remittance in convertible foreign exchange - both the conditions of Export of service under the export of service rules are satisfied that is rendering of service from India and received by receiver abroad and further receipt of consideration in convertible foreign exchange. Appeal allowed - decided in favor of appellant. Issues:1. Whether the amount payable to the appellant by the service receiver situated outside India, but paid by ONGC, qualifies as export of service.2. Classification of the service as 'Business Auxiliary Service' or 'Management Consultancy Service.'Analysis:Issue 1: Export of Service QualificationThe appellant, formerly known as M/s Enpro Finance Pvt. Limited, provided services to M/s Transocean INC, a foreign-based entity, under a consultancy agreement. The appellant contended that the amount received from the service receiver via ONGC constituted consideration in convertible foreign exchange, meeting the criteria for export of service under the rules. The Revenue disagreed and issued a Show Cause Notice demanding Service Tax. The Additional Commissioner upheld the demand, imposing penalties. The appellant's appeal to the Commissioner (Appeals) was dismissed.Analysis Continued:The appellant cited precedents where similar issues were decided in their favor by the Tribunal, including the case of National Engineering Industries Ltd. vs. Commissioner of Central Excise. They argued that the arrangement with ONGC, where payments were made on behalf of M/s Transocean INC, satisfied the conditions for export of service. The Tribunal found the Additional Commissioner's order contradictory and ruled in favor of the appellant. The privity of contract was between the appellant and the service receiver in the USA, and the payment arrangement with ONGC met the criteria for receiving consideration in convertible foreign exchange, fulfilling the export of service conditions.Issue 2: Service ClassificationThe second issue revolved around the classification of the service provided by the appellant. The appellant claimed it to be 'Business Auxiliary Service,' while the courts below classified it as 'Management Consultancy Service.' The Tribunal's decision primarily focused on the export of service qualification, finding in favor of the appellant based on the payment arrangement and privity of contract. The classification issue was not the primary basis for the Tribunal's decision.Conclusion:In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellants. The judgment emphasized the fulfillment of conditions for export of service, particularly the receipt of consideration in convertible foreign exchange, based on the payment arrangement facilitated by ONGC. The classification issue, while raised by the appellant, did not significantly impact the Tribunal's decision in this case.