2007 (12) TMI 47 - AT - Service Tax

Courier agency exempt from service tax on cross-border services under Export of Services Rules

The Appellate Tribunal CESTAT, CHENNAI held that the courier agency was not liable to pay service tax on cross-border courier services as they qualified ... Export of taxable services - exemption under Export of Services Rules - place of performance of service - requirement of convertible foreign exchange - courier agency as taxable serviceExport of taxable services - place of performance of service - exemption under Export of Services Rules - Whether the appellants were liable to pay service tax for international courier services rendered during 15-3-2005 to 15-6-2005 where part of the service was performed in India and part outside India - HELD THAT: - The Tribunal held that for the material period the Export of Services Rules, 2005 governed the question. Rule 4 expressly permitted export of services taxable under clause (105) of Section 65 to be exported without payment of service tax. The nature of the service and the fact that part performance occurred outside India brought the service within the exemption as the provision treated services performed outside India (or partly outside India) as export of taxable services. Consequently, during the period 15-3-2005 to 15-6-2005 the appellants, being a courier agency, were entitled to exemption and not liable to service tax on the international courier consideration received for that period. [Paras 4, 5]Appellants entitled to exemption under Rule 4 for the period 15-3-2005 to 15-6-2005; not liable to pay service tax for that period.Requirement of convertible foreign exchange - exemption under Export of Services Rules - Whether the proviso requiring payment to be received in convertible foreign exchange applied to the appellants for the material period - HELD THAT: - The Tribunal noted that the proviso requiring delivery outside India and receipt of payment in convertible foreign exchange was introduced by an amendment effective from 16-6-2005 and had no retrospective effect. Therefore, the convertible foreign exchange requirement did not apply to services rendered during 15-3-2005 to 15-6-2005. The decision of the lower authorities, insofar as it relied on that requirement for the earlier period, was unsustainable. The Tribunal aligned its view with an earlier Bench decision on the same issue. [Paras 3, 5]The convertible foreign exchange requirement inserted w.e.f. 16-6-2005 does not affect the appellants' entitlement to exemption for 15-3-2005 to 15-6-2005.Final Conclusion: The impugned order is set aside and the appeal is allowed: the appellants are exempt from payment of service tax for the international courier services for the period 15-3-2005 to 15-6-2005; the convertible foreign exchange condition inserted w.e.f. 16-6-2005 is inapplicable to that period. Issues:1. Whether the appellants, a courier agency, are liable to pay service tax on the consideration for courier services rendered across Indian borders.2. Interpretation of the Export of Services Rules, 2005 regarding the exemption from service tax for export of services.3. Applicability of the amendment to the Export of Services Rules, 2005 with respect to the requirement of payment in convertible foreign exchange.Analysis:1. The appellants, identified as a courier agency under Section 65(33) of the Finance Act, 1994, collected a gross amount for courier services rendered across borders. The lower authorities imposed service tax on this amount, contending that the nature of courier service determines tax liability, not the delivery means. The issue was whether the service was exported, subject to tax. The Tribunal noted the Export of Services Rules, 2005, effective from 15-3-2005, and the subsequent amendment on 16-6-2005. The Tribunal emphasized that service tax exemption applied to services taxable under Section 65 of the Act, allowing export without payment of tax.2. The Tribunal highlighted Rule 4 of the Export of Services Rules, 2005, stating that any taxable service under Section 65 could be exported without service tax payment. It was noted that before the amendment on 16-6-2005, there was no requirement for consideration to be in convertible foreign exchange for exemption. The Tribunal referenced a previous case to support the view that service tax was not applicable to international courier services partially performed in India before the amendment date.3. The Tribunal concluded that the appellants were entitled to exemption from service tax for the international courier service, part of which was performed in India and part outside, based on the Export of Services Rules, 2005. The decision set aside the lower authorities' order, emphasizing that the amendment requiring payment in convertible foreign exchange did not have retrospective effect. The appeal was allowed, providing relief to the appellants based on the legal provisions and precedents cited.This detailed analysis of the judgment from the Appellate Tribunal CESTAT, CHENNAI, clarifies the issues, legal interpretations, and the final decision regarding the liability of the courier agency for service tax on cross-border courier services and the exemption criteria under the Export of Services Rules, 2005.