2009 (12) TMI 191 - AT - Service Tax

Tribunal rules in favor of First Flight Couriers Ltd. in service tax exemption case

The Tribunal ruled in favor of the appellants, M/s. First Flight Couriers Ltd., in a case concerning the export of international courier services. The ... Export of service - Courier service - International courier service - Export of Services Rules, 2005 - Taxability of services partly performed in India - Exemption from service tax for exported services - Penalty under section 78 of the Finance Act, 1994Export of service - International courier service - Export of Services Rules, 2005 - Exemption from service tax for exported services - International courier services rendered during 1-4-2005 to 15-6-2005 were export of service under the Export of Services Rules, 2005 and not liable to service tax. - HELD THAT: - The tribunal applied rule 3 and rule 4 of the Export of Services Rules, 2005 and followed the earlier CESTAT precedent in U.B. Xpress (South) (P.) Ltd. v. CCE & ST which held that taxable services specified in clause (105), including courier service, when partly performed outside India are to be considered as performed outside India. Prior to the amendment by Notification No. 28/2005 (7-6-2005) there was no requirement that consideration be received in convertible foreign exchange for claiming export treatment. Applying that ratio, the appeals were allowed as the international courier transactions involved performance both in India and abroad and therefore qualified as export of service, attracting the exemption under the Rules. Although the Commissioner (Appeals) addressed valuation and did not expressly determine export status, the tribunal found the precedent decisive and set aside the demand.Impugned demand for service tax and the attendant levy (and penalty) in respect of international courier services during 1-4-2005 to 15-6-2005 is vacated; the appeal is allowed.Final Conclusion: Following binding tribunal precedent and the Export of Services Rules, 2005, international courier services partly performed in India during the period 1-4-2005 to 15-6-2005 were held to be export of service and not liable to service tax; the impugned demand and penalty were set aside and the appeal allowed. Issues:1. Whether the activity involved in the case was export of service or not.2. Valuation of the service provided by the appellants.3. Applicability of service tax on international courier service.Issue 1: Activity Involvement - Export of Service:The case involved a dispute regarding whether the activity conducted, international courier service, qualified as export of service under the Finance Act, 1994. The appellants believed the service was export of service under rule 3(2) of Export of Services Rules, 2005. The original authority contended that the activity did not constitute export of service, leading to the demand for service tax. The Commissioner (Appeals) did not provide a clear finding on this aspect but focused on the valuation of the service.Issue 2: Valuation of Service:The Commissioner (Appeals) addressed a new issue related to the valuation of the service provided by the appellants, rather than determining whether the activity qualified as export of service. This deviation from the primary issue led to a lack of clarity in the decision-making process regarding the tax liability of the appellants.Issue 3: Applicability of Service Tax - International Courier Service:Upon careful consideration, the Tribunal found that the issue in question had already been settled in favor of the assessee in a previous decision involving U.B. Xpress (South) (P.) Ltd. The Tribunal clarified that international courier service, which involved part of the service being performed in India and part abroad, was not subject to service tax as per rule 4 of Export of Services Rules, 2005. Relying on the precedent set in the earlier case, the Tribunal vacated the impugned order and allowed the appeal filed by the appellants, M/s. First Flight Couriers Ltd.In conclusion, the judgment revolved around the interpretation of export of service rules, the valuation of services, and the applicability of service tax on international courier services. The Tribunal's decision emphasized the exemption from service tax for international courier services involving operations both within and outside India, based on established legal precedents and statutory provisions.