TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 998
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....ef Commissioners, Revenue is in appeal against the impugned order. 2. Ms. Shivani, learned Authorized Representative for the Department, reiterates the grounds of appeal and submits that for a service to be provided by any party to be treated as "export of service", the following three conditions must be satisfied: (a) The recipient of the service is located outside India; (b) The service is provided from India and used outside India; (c) Payment is received in convertible foreign exchange. In the instant case, condition (b) is not satisfied as the service is not used outside India. The issue stands clarified by Board's Circular No.141/10/2011-TRU dated 13.05.2011; though the benefit of service has been accrued outside India, the noticee did not fulfil the condition of service that it must be "used outside India". 3. Learned Authorized Representative further submits that the noticee has not produced any credible evidence to the effect that the services have been actually used outside India; moreover, the payments have been to a third party. In respect of "Manpower Recruitment and Supply Service", the respondents have assigned some of their employees to their overseas assoc....
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....6) STR 545 (Del.) is of no help as the same is decided ultimately in favour of the respondents by the Larger Bench in 2014 (36) STR 766 (Tri. Del.).She also submits that extended period cannot be invoked as the respondent was regularly filing ST-3 Returns and had bona fide belief that the provision of services qualified to be export; penalty is also not imposable as the demand itself is not sustainable. 6. Heard both sides and perused the records of the case. The contention of the Department is that the services rendered by the respondents are performed in India and therefore cannot be considered as export. On the perusal of the Agreement, it appears that the respondents are rendering services with respect to clinical trials for the overseas company located in U.K. who undertake further research on the basis of the reports submitted by the respondent; therefore, it is not correct that the use of services is in India; it is evident that the services rendered by the respondents are used by the overseas company who are benefitted by the same. It cannot be said that service is not used outside India just because the payment is made to third-party i.e.M/s Glaxo SmithKline Services, Unl....
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....relevant portions of the decision is reproduced below: "6. At this stage, we may refer to the concept of "Value Added Tax" (VAT), which is a general tax that applies, in principle, to all commercial activities involving production of goods and provision of services. VAT is a consumption tax as it is borne by the consumer." 7. In the light of what is stated above, it is clear that Service Tax is a VAT which in turn is destinationbased consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service tax is a value added tax." 44. The concept that service tax is a destination-based consumption tax is also in conformity with international practice in respect of value added taxes. Thus, in a destination-based consumption tax, the tax is levied only at the place where the consumption takes place. It is for this reason that exports are not taxed and imports are taxed on same basis as domestic supplies. 45. The 2005 Export Rules were introduced to achieve the destination-based consumption tax concept and so exemption is provided from pay....
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....ills directly to the Indian customers. For this provision of service, Arcelor India receives consideration from Arcelor France in convertible foreign exchange. Thus, there exists a relationship of service provider and service recipient between Arcelor India and Arcelor France. 48. A service recipient is a person who makes a request for a service, in exchange of a consideration. In fact, he is the person who is liable to pay for the services received. Service recipient is not a person who is affected by the performance of the service. The Finance Act does not define the term 'service recipient'. However, the same has been clarified in the CBEC Education Guide as follows: "5.3.3 Who is the service receiver? Normally, the person who is legally entitled to receive a service and, therefore, obliged to make payment, is the receiver of a service, whether or not he actually makes the payment or someone else makes the payment on his behalf." 49. It is, therefore, clear that the recipient of service is the person at whose desire the activity is done in exchange for a consideration, i.e., the person who is obliged to make payment for the service. The recipient of service would, therefor....
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....ivities in India in view of the decision of the Supreme Court in GVK Industries. Reliance placed by the division bench on GVK Industries, as noticed above, is misplaced. The decision of Supreme Court in GVK Industries is based on an interpretation of Explanation (2) to section 9(1)(vii)(b) of the Income Tax Act, under which the income is deemed to have accrued in India. The Finance Act and the 2005 Export Rules do not contain a provision providing a deeming fiction. The distinguishing features of the decision of the Supreme Court in GVK Industries have been pointed in the earlier paragraphs of this order. The decision of the Supreme Court in GVK Industries, therefore, cannot be applied to the facts of the present case. 8. We further find that the Tribunal in the case of B.G. India Energy Pvt. Ltd. (supra) observed as follows: 7. Having considered the rival contentions, we are satisfied that under the facts and circumstances as per the requirement of Export of Services Rules, 2005 read with the explanatory Circular No. 111/05/2009-S.T., as the services provided by the appellant are in the nature of Business Auxiliary Service, the export of services is complete as the principal is....