Export of Service: on-site employee secondment qualifies as export where recipient is abroad and benefit accrues outside India.

Assignment of employees to foreign group companies on an on-site basis qualifies as export of service where the recipient is located abroad and the benefit of the service accrues outside India; physical performance in India is not determinative. The legal analysis applies Export of Service Rules and the Finance Act construct that export status depends on recipient location and accrual of benefit, and accepts non-written agreements supported by invoices and receipt in convertible foreign exchange as evidencing the contractual relationship. Operative effect: such services are treated as exports and not liable to service tax under the facts described.

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Issues: Whether the services provided by the appellant (assignment of employees to foreign group companies on on-site basis) were "used outside India" and therefore qualify as export of service under the Export of Service Rules, 2005.

Analysis: The Court examined the applicability of export of service rule 3(1)(iii) read with Section 65(19) of the Finance Act, 1994 and relevant administrative guidance (Circular No. 111/5/2009-ST) and noted that the statutory scheme and the explanatory circular treat export status as determined by the location of the service recipient and the accrual of benefit to a recipient located outside India. The Court observed that the absence of a written agreement is not determinative and that an oral understanding, supporting invoices and receipt of consideration in convertible foreign exchange establish the contractual relationship. The Court found that mere physical performance of services in India or on-site working does not by itself show that services were used in India, and that Revenue failed to demonstrate that the services were consumed within India. The Bench relied on earlier Tribunal decisions involving identical facts including Glaxo Smithkline Asia Pvt Ltd and authorities emphasising that service tax is a destination-based consumption tax and that the critical factor is the recipient's location and where the benefit accrues.

Conclusion: The services rendered by the appellant were used outside India and qualify as export of service; the impugned order confirming service tax is set aside and the appeal is allowed with consequential relief, in favour of the assessee.

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