Export of service exemption turns on strict compliance with foreign exchange payment and extended limitation where suppression is inferred.

Export-of-service exemption for General Sales Agent work was available only when the statutory conditions were strictly met: for the post-2005 period, services delivered and used outside India with receipt in convertible foreign exchange qualified as export in one appeal. However, overriding commission received through credit notes in Indian rupees did not satisfy the mandatory foreign-exchange payment condition under the circular and notification, so exemption was denied. The extended limitation period under section 73(1) was also upheld because the assessees had prior knowledge of possible service tax liability yet continued the same billing and receipt mechanism without adequate disclosure.

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Issues: (i) Whether the services rendered as General Sales Agent were export of services for the period after the Export of Services Rules, 2005 came into force; (ii) whether receipt of overriding commission in Indian rupees satisfied the condition for exemption under the circular and notification governing export of services; (iii) whether the extended period of limitation under section 73(1) of the Finance Act, 1994 was validly invoked.

Issue (i): Whether the services rendered as General Sales Agent were export of services for the period after the Export of Services Rules, 2005 came into force.

Analysis: The governing rule treated taxable services as export where the recipient was outside India and, in the case of business-related services, the services were delivered and used outside India and payment was received in convertible foreign exchange. For the post-2005 period, the conditions were found to be satisfied in relation to one appellant, since the services were delivered outside India, used in business outside India, and the consideration was received in foreign exchange.

Conclusion: The issue was answered in favour of the assessee for the post-2005 period.

Issue (ii): Whether receipt of overriding commission in Indian rupees satisfied the condition for exemption under the circular and notification governing export of services.

Analysis: The circular and notification granted exemption only where payment for the taxable service was received in India in convertible foreign exchange. The condition was held to be mandatory and to call for strict compliance. The assessee received the commission through credit notes in Indian currency, which did not meet the stipulated precondition. The reliance placed on earlier income-tax and other decisions was distinguished on facts because those cases involved foreign-exchange remittances or retention from foreign-currency receipts, unlike the present mode of payment.

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Issue (iii): Whether the extended period of limitation under section 73(1) of the Finance Act, 1994 was validly invoked.

Analysis: The record showed repeated correspondence, legal opinions, and awareness that service tax liability could arise on the overriding commission. Despite that knowledge, the assessees continued the same billing and receipt mechanism and did not disclose the position in a manner that would negate suppression. The surrounding circumstances were held sufficient to attract the proviso to section 73(1).

Conclusion: The issue was answered against the assessee and in favour of the Revenue.

Final Conclusion: The common judgment granted relief only to the extent of recognising export treatment for the post-2005 period in one appeal, while upholding taxability on the INR receipts and sustaining the invocation of extended limitation.

Ratio Decidendi: A claim to export-of-service exemption must satisfy every statutory condition strictly, and where the recipient has an office in India, the service is treated as export only if the delivery, use, and receipt conditions are all fulfilled; conscious continuation of a contrary payment structure after legal advice can justify invocation of the extended limitation period.

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