TaxTMI 
TaxTMI 
2026 (3) TMI 1068
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the appellant was liable to pay service tax under the category of manpower recruitment or supply agency services on the grounds that the said services were not used outside India. A show cause notice dated 30.08.2013 were issued to the appellants demanding service tax of Rs. 32,75,533/- along with interest and penalty. Order in original dated 14.10.2016 was passed confirming the service tax demanded with interest and equal penalty under Section 78 and a penalty of Rs. 10,000/- under Section 77 of the Finance Act, 1994. On an appeal filed by the appellants learned Commissioner (Appeals) vide impugned order dated 31.03.2017 upheld the order-in-original. Hence, this appeal. 2. Ms. Krati Singh, learned counsel for the appellants submits that the services rendered by the appellant fall within the ambit of "business auxiliary services" in terms of Section 65 (19) of the Finance Act, 1994 as covered under category III of Rule 3(1)(iii) of export of service rules as the service recipient was located outside India; service was provided from India and used outside India and payment was received in convertible foreign exchange. She submits that revenue erred in construing that the service....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal Nos. 10815-10819/2014 decided on 06.05.2025 * Maruti Suzuki India Ltd., 2024 (4) TMI 724-CESTAT Chandigarh * Sunshine Steel Industries, 2023 (8) Centax 210 (SC) * Hoshiarpur Automobiles, 2024 (4) TMI 432-CESTAT Chandigarh * Schneider Electric India Pvt Ltd, (2023) 9 Centax 362 * YKK India PVt Ltd, 2025 (11) TMI 437-CESTAT Chandigarh 4. Ms. Amita Gupta, Learned Authorized representative for the Revenue reiterates the findings of the impugned order. She submits that the case of their group company relied upon by the appellants is not applicable as the facts are different; in that case there was an agreement between oversees entities and the appellants therein; in the instant case, there is no formal written agreement between the parties involved. She relies on Hon'ble Supreme Court decision in the case of Northern Operating Systems Pvt Ltd. 2022 (61) G.S.T.L. 129 (SC). 5. In rebuttal, Learned Counsel for the appellants submits that the presence or absence of the written agreement does not alter the facts of the case; the tenor of the agreement can be gleaned by the understanding between the parties and the invoices raised. It is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ian company whereas in the instant case the facts are in the reverse order. 7. We find that this Bench has decided a case involving identical facts in respect of Glaxo Smithkline Asia Pvt Ltd, 2023 (10) TMI 998. We find that the Bench has observed as under: 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; 5 ST/1349/2011 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, Unlimited, UK. It has been clarified that the said third-party has been maintaining the accounts of M/s SB Plc, UK. We find t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 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 destination based 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 payment of service tax to 7 ST/1349/2011 services exported out of I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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, therefore, be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed outside India, would be in relation to business activities 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 Auxi....