2018 (2) TMI 76 - AT - Service Tax

Appellant's Services Qualify as Export under Rule 3(3)

The Tribunal held that the services provided by the appellant qualified as export of Business Auxiliary Services under Rule 3(3) of the Export of Service ... Classification of services - Export of service or not - The commercial services to be rendered by the GSA are specified in the agreement. The agreement portion under the caption 'Commission to GSA' contains various commissions applicable to GSA. The Ethiopian Airlines shall pay GSA normal and Overriding Commission for Air transportation over the service of Ethiopian Airlines sold only in the allowed territory by the GSA or sub-agents on Ethiopian Airlines traffic documents/ticket stock - whether the service would be classified under Business Auxiliary service or Air Travel Agent Service? - Held that: - the matter has already been analysed, considered and decided by this very Bench in the case of M/s. Arafaath Travels Pvt Ltd. [2017 (8) TMI 554 - CESTAT CHENNAI], where it was held that Evidently, the commercial services provided by the appellant, inter alia, soliciting, promoting and selling passenger air transportation and cargo and mail transportation for Saudia is very much a Business Auxiliary Service, ordered by Saudi Arabian Airlines, Jeddah, to benefit all such service flowing to Saudias business - appeal allowed - decided in favor of appellant. Issues Involved:1. Classification of service provided by the appellant.2. Determination of whether the service qualifies as export of service under Rule 3(3) of Export of Service Rules, 2005.3. Consideration of payment received in Indian Rupees as convertible foreign exchange.Issue-wise Detailed Analysis:1. Classification of Service Provided by the Appellant:The adjudicating authority classified the service provided by the appellant, M/s. Shireen Travel Ltd., as Business Auxiliary Service (BAS). The appellant, acting as a General Sales Agency (GSA) for Ethiopian Airlines, received commissions on passenger and cargo sales. The adjudicating authority's stance was that the services provided under the GSA agreement fell under BAS, making them subject to service tax.2. Qualification as Export of Service:The core issue was whether the services provided by the appellant could be considered as export of service under Rule 3(3) of the Export of Service Rules, 2005. The adjudicating authority concluded that the services did not qualify as export since the services were rendered within India, specifically in Tamil Nadu, Andhra Pradesh, Karnataka, and Kerala. The authority argued that since the services were not delivered and used outside India, they did not meet the main condition for export of services. The appellant contended that their services should be treated as export of services, relying on the precedent set in cases like M/s. J.B. Boda and PSA SICAL Terminal Ltd. vs. Commissioner of Customs and M/s. Indian Engineering Industries Ltd. vs. Commissioner of Central Excise.3. Consideration of Payment in Indian Rupees:The appellant received the Overriding Commission (ORC) in Indian Rupees and argued that this should be considered as convertible foreign exchange. They cited the practice of deducting ORC from the proceeds and remitting the balance to Ethiopian Airlines, supported by credit notes issued by Ethiopian Airlines' local office in Mumbai. The appellant referenced the Tribunal's decision in M/s. Arafaath Travels Pvt. Ltd. and the High Court of Madras' decision in M/s. Supasesh General Insurance Services, which held that such transactions should be deemed as receipt in convertible foreign exchange.Tribunal's Analysis and Decision:The Tribunal reviewed the appellant's arguments and the precedents cited. It noted that the same issue had been previously analyzed and decided in favor of the appellant in the case of M/s. Arafaath Travels Pvt. Ltd. The Tribunal reiterated that the services provided by the appellant, although performed in India, accrued benefits to the foreign company, thus satisfying the requirement of Rule 3(3) of the Export of Service Rules, 2005. The Tribunal also addressed the contentious issue of payment in Indian Rupees, stating that retaining the commission amount while remitting the proceeds to the foreign client should be treated as saving foreign exchange, akin to receiving convertible foreign exchange.The Tribunal emphasized the principle of stare decisis, following the law laid down by the jurisdictional High Court of Madras in the case of M/s. Supasesh General Insurance Services. It concluded that the services rendered by the appellant qualified as export of Business Auxiliary Services and were exempt from service tax liability.Conclusion:The Tribunal set aside the impugned order and allowed the appeal, granting consequential benefits to the appellant as per law. The decision was pronounced in open court, affirming the appellant's position that their services constituted export of service and were exempt from service tax.