2010 (1) TMI 143 - AT - Service Tax

Denial of service tax refund for commission agent reversed under Export of Services Rules 3 and 5; refund granted

CESTAT, MUMBAI - Appeal allowed. Tribunal held that denial of refund of service tax paid by the appellant as a commission agent under Rule 5 of the Export ... Rejection of claims for rebate of service tax which was paid by the appellant as commission agent - rebate of the service tax under Rule 5 of the Export of Services Rules, 2005 - HELD THAT:- I find that the above denial of refund of service tax to the appellant under Rule 5 ibid is contrary to the express provisions of law as clarified in CBEC circular No.111/5/2009-ST dated 24.2.2009. The Board, in respect of business auxiliary services falling under Rule 3(1)(iii) of the Export of Services Rules, 2005, clarified thus: 'The phrase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India. What is accrued outside India is the benefit in terms of promotion of a business of a foreign company.' This circular is in conformity with the provisions of Rules 3 and 5 of the Export of Services Rules, 2005. The service rendered by the appellant was admittedly one of the business auxiliary services classified under Section 65(105)(zzb) of the Act. The features of this service are also eloquently discernible from the records. As a commission agent, the appellant canvassed purchase orders from prospective Indian buyers for the goods supplied by the foreign companies. These purchase orders were transmitted to the foreign companies either by courier or by electronic means. The rendering of the service was complete only when the purchase orders canvassed by the appellant in India were received by the foreign companies. These purchase orders were, admittedly, received abroad. They were also, admittedly, acted upon by the foreign companies abroad. In other words, the benefit of the service provided by the appellant accrued to the foreign companies outside India. The condition in question stood fulfilled by the appellant. The contrary view taken by the lower authorities cannot be sustained. The facts of the case of Blue Star Ltd. [2008 (3) TMI 32 - CESTAT BANGALORE] are similar to those of the instant case. It was held in that case that the appellant was entitled to refund under Rule 5 on the service tax paid by them in respect of export of business auxiliary service. In the case of ABS India Ltd. [2008 (8) TMI 53 - CESTAT BANGALORE] also, it was held that exemption was admissible to the assessee in respect of business auxiliary service exported by them. The Tribunal found that the benefit of such export was derived by the recipient located outside India and was utilised outside India. The decision of this Tribunal in the case of B.A. Research India Ltd.[2009 (11) TMI 213 - CESTAT, AHMEDABAD] is also to the same effect. Appeal is allowed. Issues:- Rejection of claims for rebate of service tax paid by the appellant as a commission agent.- Interpretation of conditions for rebate of service tax under Rule 5 of the Export of Services Rules, 2005.- Denial of refund of service tax by lower authorities.- Clarification on the phrase 'used outside India' in the context of business auxiliary services.- Application of relevant legal provisions and circulars to determine eligibility for rebate of service tax.Analysis:1. The appellant filed an appeal against the rejection of claims for rebate of service tax paid as a commission agent. The appellant procured purchase orders in India for suppliers of goods located abroad, who exported the goods to buyers in India and paid commission to the appellant in foreign exchange. The claim for rebate was made under Rule 5 of the Export of Services Rules, 2005, which specified conditions including the service being delivered outside India and payment received in convertible foreign exchange.2. The lower authorities acknowledged the receipt of commission in foreign exchange but refused to accept that the service provided by the appellant was delivered and used outside India. Consequently, the claim for rebate of service tax was rejected, leading to the denial of a refund amounting to Rs. 8,02,364 for a specific period.3. The Tribunal found that the denial of refund was contrary to the law as clarified in a CBEC circular, which stated that the benefit of the service accruing outside India could constitute export of service even if the activities took place in India. The service provided by the appellant, classified as business auxiliary services, met the conditions for export as per Rules 3 and 5 of the Export of Services Rules, 2005. The appellant's activities, including procuring purchase orders in India and transmitting them abroad, resulted in the benefit accruing outside India, fulfilling the conditions for rebate.4. The Tribunal referred to previous decisions supporting the appellant's case, such as Blue Star Ltd. vs. CCE, ABS India Ltd. vs. CST, and CST, Ahmedabad vs. B.A. Research India Ltd., where the benefit of export was derived by recipients outside India. The Tribunal set aside the impugned order and allowed the appeal, emphasizing that the business auxiliary service provided by the appellant was delivered and used outside India, making them eligible for the rebate of service tax.This detailed analysis highlights the key legal issues, the application of relevant rules and circulars, and the Tribunal's decision in favor of the appellant regarding the rebate of service tax.