Ship crew recruitment services to Singapore entity ruled as export services, exempt from service tax

CESTAT Mumbai held that ship crew recruitment services provided to a Singapore-based entity constituted export of services, not intermediary services, and were therefore not liable to service tax. The tribunal found that the appellant operated on a principal-to-principal basis, receiving payment in foreign currency for services including crew selection, medical testing, and transportation. The services fell outside India's taxable territory under Place of Provision of Service Rules, 2012. The tribunal also ruled that extended period of limitation was improperly invoked without evidence of suppression or willful misstatement. The order was set aside and appeal allowed.

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Issues Involved:
1. Liability of service tax on ship crew recruitment services provided by the appellants to ESM Pte. Singapore.
2. Classification of services as 'intermediary services' and whether they qualify as 'export of services' under the Place of Provision of Services Rules, 2012.
3. Invocation of the extended period of limitation for demanding service tax.

Summary:

1. Liability of Service Tax on Ship Crew Recruitment Services:
The appellants, M/s Executive Ship Management Private Limited, provided ship crew recruitment services to ESM Pte. Ltd., Singapore, claiming it as export of services and thus not liable for service tax. The DGGI concluded that these services were intermediary services, making the appellants liable to pay service tax under Rule 9(c) of the Place of Provision of Service Rules, 2012. The Commissioner confirmed the service tax demand along with penalties.

2. Classification as 'Intermediary Services' and 'Export of Services':
The appellants argued that their services did not meet the criteria for intermediary services as clarified by the Board in Circular No. 159/15/2021-GST dated 20.09.2021 and various Tribunal decisions. They contended that they provided services on their own account to ESM Pte. Singapore, receiving payment in foreign currency, thus qualifying as export of services. The Tribunal examined the agreements and international maritime conventions, concluding that the services provided were not intermediary services but ship crew management services. The place of provision for these services is the location of the recipient, i.e., outside India, making them export of services under Rule 3 of the Place of Provision of Services Rules, 2012.

3. Invocation of Extended Period of Limitation:
The appellants claimed that the extended period of limitation could not be invoked as there was no wilful misstatement or suppression of facts. The Tribunal referred to the Supreme Court judgment in Uniworth Textiles Ltd. Vs. Commissioner of Central Excise, Raipur, which held that the burden of proving mala fide conduct lies with the Revenue. The Tribunal found that the SCN did not provide specific grounds for invoking the extended period, making the confirmation of demands for the extended period unsustainable.

Conclusion:
The Tribunal set aside the impugned order dated 23.07.2021, holding that the services provided by the appellants were export of services and not liable for service tax. The appeal was allowed in favor of the appellants.

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