2024 (1) TMI 1438 - AT - Service Tax

Investment advisory services to overseas group companies qualify as export under Rule 3(2)(a) Export of Service Rules 2005

CESTAT Mumbai-AT allowed the appeal regarding non-payment of service tax on non-binding investment advisory services provided to overseas group companies. ... Non-payment of service tax - providing nonbinding investment advisory services to various overseas clients (Group companies) as per the contractual norms agreed upon - export of service as per the conditions laid down under Rule 3(2)(a) of the Export of Service Rule, 2005 or not - CENVAT Credit - input services - rent-a-cab service - outdoor catering service - air travel agent service. Non-payment of service tax - providing nonbinding investment advisory services to various overseas clients (Group companies) as per the contractual norms agreed upon - export of service as per the conditions laid down under Rule 3(2)(a) of the Export of Service Rule, 2005 or not - HELD THAT:- It is an admitted fact on record that the appellants have entered into the agreement with the overseas entities for providing the services under the category of non-binding investment advisory services in their behalf. The payment for provision of said services were also received in convertible foreign exchange. The services provided by the appellants were for the benefit of the overseas entities and as such, falls under the Category-III of services defined under Rule 3(1) (iii) ibid - CBEC vide Circular dated 13.05.2011 has also clarified the said phrase ’used outside India’, mentioning that the benefit should accrue in favour of the overseas entities for the purpose of qualifying certain transaction as export of service. Further, it is also found that the issue arising out of the present dispute is no more open for any debate, in view of the order passed by this Tribunal in the case of Arcelor Mittal Stainless India Pvt. Ltd. [2023 (8) TMI 107 - CESTAT MUMBAI-LB]. The Larger Bench of the Tribunal in said case has held that since the benefit of service is accruing outside India, the said service should qualify as export of service in terms of the Rules, 2005. CENVAT Credit - input services - rent-a-cab service - outdoor catering service - air travel agent service - adjudicating authority has denied the benefit of Cenvat Credit solely on the ground that no documentary evidences were produced to demonstrate that those disputed services would be considered as input service - HELD THAT:- Since, the appellants are the business entity and utilized the services for provision of the output services and also paid the service tax on the input services, it cannot be said that those disputed services were not used/utilized for provisions of the output services. Since, the disputed services were used for accomplishing the purpose of the business, the said service, should qualify as ‘input service’, defined under Rule 2(l) ibid. Conclusion - i) The non-binding investment advisory services provided by the appellants qualified as export of service. ii) The appellants were entitled to avail Cenvat Credit on the disputed input services. There are no merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellant - appeal allowed. The issues presented and considered in this legal judgment are as follows:1. Whether non-binding investment advisory services provided by the appellants qualify as export of service under Rule 3(2)(a) of the Export of Service Rule, 2005.2. Whether the appellants are entitled to avail Cenvat Credit on input services such as rent-a-cab service, outdoor catering service, and air travel agent service.Issue-wise detailed analysis:Issue 1:- Relevant legal framework and precedents: The appellants argued that their non-binding investment advisory services fall under category (iii) services as per Rule 3(1)(iii) of the Export of Service Rules, 2005.- Court's interpretation and reasoning: The court considered Circulars issued by the CBEC which clarified that services used outside India, where the benefit accrues to overseas entities, qualify as export of service.- Key evidence and findings: The appellants had agreements with overseas entities for providing services, and payments were received in foreign exchange.- Application of law to facts: The court relied on the interpretation of 'used outside India' and the benefit accruing to overseas entities to determine the classification of services as export.- Conclusions: The court held that the benefit of service accruing outside India qualifies the service as export, in line with the ruling in Arcelor Mittal Stainless India Pvt. Ltd. case.Issue 2:- Relevant legal framework and precedents: The appellants claimed that the disputed input services were used for providing output services and should qualify as 'input service' under Rule 2(l) of the Cenvat Credit Rule, 2004.- Court's interpretation and reasoning: The court noted that the appellants had stated that the disputed services were utilized for output services, and the denial of Cenvat Credit was based on lack of documentary evidence.- Key evidence and findings: The appellants argued that the disputed services were essential for their business operations.- Application of law to facts: The court considered the nature of the services and the purpose for which they were used by the appellants.- Conclusions: The court held that since the disputed services were used for business purposes and contributed to providing output services, they should qualify as 'input service' and the denial of Cenvat Credit was unfounded.Significant holdings:- The court referred to Circulars by the CBEC and the ruling in Arcelor Mittal Stainless India Pvt. Ltd. case to establish that services benefiting overseas entities qualify as export.- The court set aside the impugned order and allowed the appeal in favor of the appellant.In conclusion, the court determined that the non-binding investment advisory services provided by the appellants qualified as export of service and that the appellants were entitled to avail Cenvat Credit on the disputed input services. The judgment was based on the interpretation of relevant legal provisions, precedents, and the specific circumstances of the case.