Court classifies custodial services for Foreign Institutional Clients as export under Export of Service Rules, 2005.

The court held that custodial services provided to Foreign Institutional Clients (FII's) by the respondent were classified as an export of service under sub-clause (iii) of Rule 3 of the Export of Service Rules, 2005. The court relied on a clarificatory Circular by the Central Board of Excise & Customs emphasizing the location of the service recipient. As no substantial question of law was found, the court dismissed the appeal and affirmed the Tribunal's decision in favor of the respondent, granting them the benefits claimed.

---

---

Issues:
- Interpretation of Export of Service Rules, 2005 for custodial services provided to Foreign Institutional Clients (FII's) from May 2006 to December 2007.

Analysis:
The appellant challenged an order by the Tribunal regarding the classification of custodial services provided to Foreign Institutional Clients (FII's) as export of service under Rule 3 of the Export of Service Rules, 2005. The respondent, registered under Banking and Financial Services, claimed a rebate of service tax under the said Rules, which was rejected by authorities citing that the services were performed in India for Indian investments. However, the Tribunal allowed the appeal, stating that the services were provided to a recipient abroad, relying on a previous decision. The appellant argued that all services were performed in India for Indian investments, thus not constituting an export of services. The court examined Rule 3 of the Export Service Rules, which classifies taxable services into three categories and found that custodial services fell under the category of services related to business or commerce provided to a recipient outside India, as per sub-clause (iii) of the Rule. The court also referenced a clarificatory Circular by the Central Board of Excise & Customs, which emphasized the location of the service recipient over the place of performance, supporting the respondent's position.

The court concluded that the custodial services provided by the respondent to Foreign Institutional Clients (FII's) were covered under sub-clause (iii) of Rule 3 of the Export Services Rules, 2005, entitling the respondent to the benefits claimed. The court noted that a binding Circular by the Central Board of Excise & Customs further supported the respondent's position, emphasizing the location of the service recipient for services falling under the relevant category. As the issue was clarified by the Circular and no substantial question of law arose, the court dismissed the appeal, affirming the Tribunal's decision in favor of the respondent.

---