2010 (5) TMI 221 - AT - Service Tax

Appellant wins service tax refund case for export services, Tribunal emphasizes place of service delivery

The Tribunal ruled in favor of the appellant, allowing the refund claim for service tax paid under protest. The appellant's services were considered ... Export of Services – Services rendered / services delivered outside India - Business Auxiliary Services – Refund of service tax paid - the appellant filed a refund claim of Rs.6,71,439/- for the period October 2005 to June 2007 on the ground that they are not liable to pay service tax as the appellant was appointed by foreign company for promoting their sales in India and appellants are getting commission from the foreign principal in foreign currency and their activities are considered as export services and the same are exempted form payment of service tax. However, they paid service tax under protest. – Held that: - What is in dispute is whether the business auxiliary service was delivered outside India and used outside India. 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. – Benefit of export allowed Issues:- Rejection of refund claim on grounds of time limitation and inadmissibility as per Notification No. 2/2007-ST dated 1.3.2007.Analysis:1. Rejection of Refund Claim: The appellant filed a refund claim for service tax paid under protest, stating that their activities were considered as export services exempt from service tax. The claim was partially rejected by the adjudicating authority, citing time limitation and inadmissibility as per a specific notification. The appellant contended that their services were provided to a foreign principal, and since the benefits accrued outside India, they were not liable to pay service tax. They argued that the rejection based on limitation lacked legal authority and that the provisions cited were not applicable to their case. They relied on precedents where similar refund claims were allowed, emphasizing that the service tax collected erroneously should be refunded. The Revenue, however, argued that the services were used in India, making the appellant liable for service tax. They referenced legal decisions highlighting the importance of the place of service performance in determining tax liability.2. Judicial Analysis: The Tribunal examined the nature of the services provided by the appellant, which involved procuring purchase orders in India for goods supplied by foreign companies. The Tribunal noted that the service was completed when the purchase orders were received and acted upon by the foreign companies outside India. It was established that the benefits of the service accrued outside India, fulfilling the conditions for export of service as per relevant rules. Referring to a circular clarifying the interpretation of 'used outside India,' the Tribunal found that the appellant's case aligned with the provisions of the Export of Services Rules. The Tribunal differentiated this case from precedents cited by the Revenue, emphasizing that the services provided by the appellant were utilized outside India, contrary to the cases where services were performed and consumed within India. Relying on the precedent of KSH International Pvt. Ltd., the Tribunal allowed the appeal, setting aside the rejection of the refund claim and granting consequential relief.In conclusion, the Tribunal ruled in favor of the appellant, allowing the refund claim and emphasizing that the services provided were considered export services exempt from service tax due to the benefits accruing outside India. The judgment highlighted the importance of analyzing the place of service delivery and usage to determine tax liability, ultimately setting aside the rejection based on time limitation and inadmissibility under a specific notification.