2024 (9) TMI 1788 - AT - Service Tax

Electronic Services to Parent Company in Netherlands Qualify as Export Under Rule 4(a), Allowing CENVAT Credit Refund

The CESTAT Mumbai held that services provided electronically to a parent company in the Netherlands qualify as export of services under Rule 4(a) of the ... Refund of Service Tax paid on the input services, which were used for export of the output services to the parent company located in Netherlands - Export of services or not - scope and purview of Rule 4(a) of the Place of Provisions of Service Rules, 2012 - HELD THAT:- On plain reading of proviso clause appended to clause (a) of Rule 4 of the Place of Provision of Service Rules, 2012, it transpires that in order to fall within the purview of such clause, the basic requirement is that there should be involvement of the goods for consideration of the place of provision of service. Since the services were provided by the appellant in electronic mode and the server for receiving of such output service was installed in Netherland, it cannot be said that the case of the appellants fall within the purview of Rule 4(a) ibid. Since the appellants had provided the services for the benefit of the recipient of the service located in Netherland, the transaction should appropriately be termed as 'export of service' and the unutilized CENVAT Credit available in the Books of Account of the appellants herein, should be considered for grant of the benefit of refund. There are no merits in the impugned order, in so far as it has rejected the refund benefit claimed by the appellants - the impugned order is set aside - appeal allowed. ISSUES: Whether the provision of Information Technology Software Services to a parent company located abroad qualifies as 'export of service' under the Place of Provision of Service Rules, 2012.Whether Rule 4(a) of the Place of Provision of Service Rules, 2012 applies to services provided electronically without involvement of goods.Whether refund of CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004 is admissible for Service Tax paid on input services used in export of output services.Whether the proviso to clause (a) of Rule 4 of the Place of Provision of Service Rules, 2012 requires involvement of goods to deny export of service treatment. RULINGS / HOLDINGS: The services provided electronically to a service recipient located abroad do not fall within the scope of Rule 4(a) of the Place of Provision of Service Rules, 2012, as the basic condition of involvement of goods is not met.The transaction qualifies as 'export of service' since the services were provided for the benefit of the recipient located outside India and delivered electronically.The appellants are entitled to refund of unutilized CENVAT Credit under Rule 5 of the CENVAT Credit Rules, 2004, as the input services were used in or in relation to the export of output services.The proviso to clause (a) of Rule 4 requires involvement of goods to determine the place of provision of service, and in absence of such involvement, the services cannot be considered as provided within India for the purpose of denying export of service status. RATIONALE: The Court applied the Place of Provision of Service Rules, 2012, specifically Rule 4(a) and its proviso, interpreting the requirement of involvement of goods as a precondition for applying that rule.The CENVAT Credit Rules, 2004, Rule 5, were applied to allow refund of Service Tax credit on input services used for export of output services.The reasoning emphasized the mode of service delivery (electronic) and the location of the service recipient (abroad) as determinative factors for export of service classification.No dissent or doctrinal shift was indicated; the decision reaffirmed established interpretations of export of service under the relevant Rules.