2026 (3) TMI 410 - AT - Service Tax

Export of Services: call centre services qualify when effectively used abroad and paid in convertible foreign exchange, enabling rebate.

Call centre services provided from India qualify as export of services where two conditions in Rule 3(2) of the Export of Service Rules, 2005 are met: the ... Export of services - Used outside India - call centre services provided to British Airways UK - convertible foreign exchange - Entitlement to rebate under Rule 5 and Notification No.11/2005-ST dated 19.04.2005 for the relevant period -Whether the services provided by the respondent to BA UK falls under the definition of Export of Service ? Export of services - Used outside India - Recipient of service - HELD THAT:- The issue is no longer res integra as the Tribunal in the respondent’s own case for the previous [2016 (8) TMI 589 - CESTAT NEW DELHI] and subsequent period [2017 (4) TMI 1178 - CESTAT CHANDIGARH] in view of the agreement has held or after considering the agreement between the parties has held that the services provided by the respondent to BA UK fall in the definition of “Export of Services. The Tribunal examined the two conditions in Rule 3(2): (a) service provided from India and used outside India; and (b) payment received in convertible foreign exchange. The Court relied on departmental circulars clarifying that 'used outside India' is to be interpreted with reference to where effective use and enjoyment accrues, and on prior Tribunal in Paul Merchants Ltd.[2012 (12) TMI 424 - CESTAT, DELHI (LB)], Vodafone Essar Cellular Ltd. [2013 (7) TMI 178 - CESTAT MUMBAI] & Microsoft Corporation (I) Pvt. Ltd.[2014 (10) TMI 200 - CESTAT NEW DELHI (LB)] and Supreme Court in the case of Commissioner of Service Tax-III, Mumbai Vs Vodafone India Ltd. [2025 (8) TMI 938 - SUPREME COURT] decisions treating the place of accrual/benefit as determinative. The Larger Bench in the case of Arcelor Mittal Stainless (I) Pvt. Ltd. [2023 (8) TMI 107 - CESTAT MUMBAI-LB] pronouncement that the recipient of service is the person at whose instance and expense the service is provided was applied to the contractual facts which show that BA UK was the recipient and payer under the agreement. Given that the services were provided to and for the benefit of BA UK (a person outside India) and consideration was paid by BA UK, the Tribunal concluded that the services were used outside India and thus fall within the definition of export of services under Rule 3(2). The Tribunal further noted that the issue had been decided in the respondent's favour for adjacent periods and those decisions were not stayed or successfully challenged by the Department. [Paras 10, 11, 12] The call center services qualify as export of services under Rule 3(2) and the rebate claim for the specified periods is allowable. Final Conclusion: The appeal is dismissed; the impugned order of the Commissioner (Appeals) upholding the respondent's entitlement to rebate on the call center services (on the ground that they qualify as export of services) is upheld for the specified periods. Issues: (i) Whether call centre services provided by the respondent to British Airways UK qualify as 'export of services' under Rule 3(2) of the Export of Service Rules, 2005 thereby entitling the respondent to rebate under Rule 5 and Notification No.11/2005-ST dated 19.04.2005 for the relevant period.Analysis: The issue requires examination of the two conditions in Rule 3(2) of the Export of Service Rules, 2005: (a) that the service is provided from India and used outside India, and (b) that payment is received in convertible foreign exchange. The phrase 'used outside India' has been interpreted by departmental circulars dated 24.02.2009 and 13.05.2011 to mean effective use and enjoyment of the service outside India. Previous Tribunal decisions addressing similar call centre services and the interpretation of place of use, including Paul Merchants Ltd., Vodafone Essar Cellular Ltd., Microsoft Corporation (I) Pvt. Ltd., and the Larger Bench decision in Arcelor Mittal Stainless (I) Pvt. Ltd., uphold that the recipient of service is the person at whose instance and expense the service is provided and that effective use and enjoyment by an overseas recipient satisfies the 'used outside India' condition. The agreement between the parties shows services were provided to and paid by British Airways UK and had direct impact on BA UK operations; payment was in convertible foreign exchange. The Tribunal in earlier orders on adjacent periods and the absence of challenge or stay of those decisions support consistency of conclusion for the present period.Conclusion: The call centre services provided by the respondent to British Airways UK qualify as export of services under Rule 3(2) of the Export of Service Rules, 2005 and the respondent is entitled to the rebate under Rule 5 of the Export of Service Rules, 2005 read with Notification No.11/2005-ST dated 19.04.2005. The Revenue's appeal is dismissed and the impugned order is upheld in favour of the assessee.