Steamer agent's timber segregation and progress reports to foreign principals qualify as export under Rule 3(ii) of Export Service Rules 2005

CESTAT Ahmedabad held that services provided by a steamer agent and cargo handling agency qualified as export of service under Rule 3(ii) of Export of Service Rules, 2005. The appellant provided segregation and internal shifting of timber logs for foreign principals and sent progress reports to them. The tribunal found that sending progress reports to foreign service recipients constituted part performance outside India, making the service partly performed outside India. Following precedents from SGS India Pvt Ltd and B A Research India Ltd, the tribunal concluded that service completion required delivery of progress reports to foreign clients, qualifying as export of service. The demand was held unsustainable.

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Issues Involved:

1. Classification of services provided by the appellant.
2. Determination of whether the services qualify as export of service.
3. Applicability of service tax on the services provided.

Detailed Analysis:

1. Classification of Services Provided by the Appellant:

The appellant is engaged in providing services as a steamer agent and a cargo handling agency, registered under Section 65 (105) (i) and (zr) of the Finance Act, 1994. The services involve segregation and internal shifting of timber logs within the port area and clearing vessels for export cargo. The appellant contends that these services fall under sub-clauses (zn) and (zr) of Clause (105) of Section 65 of the Finance Act, 1994. The classification of these services is crucial as it determines the applicability of service tax and the possibility of qualifying as export of service.

2. Determination of Whether the Services Qualify as Export of Service:

The appellant argues that the services provided are partly performed outside India, as they involve sending service completion reports to foreign principals. According to the Export of Service Rules, 2005, services performed partly outside India qualify as export of service. The appellant relies on several judicial precedents to support this claim, emphasizing that the delivery of reports to foreign clients is an integral part of the service. The tribunal examined the Export of Service Rules, 2005, particularly Rule 3(ii), which states that services partly performed outside India are considered as performed outside India. The tribunal found that the appellant's services, including the delivery of progress reports to foreign principals, are indeed partly performed outside India, thus qualifying as export of service.

3. Applicability of Service Tax on the Services Provided:

The central issue is whether the services rendered by the appellant are subject to service tax. The appellant did not collect or pay service tax, believing the services were exported. The tribunal referred to the Export of Service Rules, 2005, and relevant case law, including judgments in B A Research India Ltd and SGS India Pvt Ltd, which support the notion that services completed upon delivery of reports to foreign clients qualify as export of service. The tribunal concluded that since the appellant received payment in convertible foreign exchange and the services were partly performed outside India, they qualify as export of service. Consequently, no service tax is demandable on such export of service, rendering the department's demand unsustainable.

Conclusion:

The tribunal set aside the impugned order, allowing the appeal with consequential relief. The services provided by the appellant were deemed to qualify as export of service, exempting them from service tax liability. The decision underscores the importance of the location of service performance and the receipt of payment in foreign exchange in determining the applicability of service tax.

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