TaxTMI 
TaxTMI 
2026 (4) TMI 506
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....t, 1994 (in short, Act) for the periods 01.07.2003 to August, 2004 and June, 2005 to March, 2006. The date of show cause notice is 17.08.2006. 3. C.M.A.No.2359 of 2007 has been filed by ETA Travel Agency Pvt. Ltd. (in short, ETA) assailing proceedings for levy of service tax for the period July 2003 to November, 2004. The date of show cause notice is 16.11.2005. 4. The substantial questions of law that have been admitted for consideration on 19.09.2008 in the case of Translanka are as follows: 1. Whether in the facts and circumstances of the cases, the Tribunal was correct in holding that the decision rendered in the context of Income Tax is not applicable to service tax? 2. Whether in the facts and circumstances of the cases, the Tribunal was correct in holding that Board Circular No.5615/2003 dated 25.04.2003 is not applicable, since there is no physical export of service? 3. Whether in the facts and circumstances of the case, the Tribunal was correct in holding that there is no export of service? 4. Whether in the facts and circumstances of the case, the Tribunal was correct in holding that the principles for invoking extended period of ....
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.... indicating that service tax ought to have been remitted under the category of 'Business Auxiliary Services'. The defence of the Appellants was that it was entitled to an exemption in terms of Notification No.21/2003 dated 22.11.2003 in respect of the commission earned for passenger and cargo ticket sales in foreign currency. 9. However, as the investigation revealed that payments towards ORC had been received from Srilankan Airlines and Malaysian Airlines by way of credit notes in Indian currency (INR), based on the documents found, show cause notices were issued proposing to bring the receipts to tax, along with penalty for non-registration of the appellants under the category 'Business Auxiliary Services' for the periods as referred to in the paragraphs supra. 10. The appellants responded, primarily relying upon the judgment of the Supreme Court in J.B.Boda & Co. Pvt. Ltd. V. Central Board of Direct Taxes [(1997) 223 itr 271] for the proposition that the receipts of commission, though in Indian currency, satisfied the requirement for export of service and hence there should be no liability to tax. 11. Overriding the arguments advanced, orders-in-original had been passed....
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....dated 22.11.2003 were precursors to Notification No.9/2005 dated 03.03.2005 under which Export of Service Rules, 2005 were notified, with effect from 15.03.2005. The Notifications made it clear that in order to avail the benefit of exemption on the ground of export, the receipts must be in foreign exchange only. In the present case, it is an admitted position that the commission was received in Indian currency and hence the appellants had not satisfied the precondition for grant of exemption. 16. As far as Translanka is concerned, it is an admitted position that the ORC received post June 2005 was in foreign currency. Those services would be covered by the Rules and Rule 3, dealing with Export of Taxable Service is extracted below, to the extent to which it is relevant: 3. Export of taxable service.- The export of taxable service shall mean, - ......... (3) in relation to taxable services, other than, - (i) the taxable services specified in sub-clauses (a), (f), (h), (i), (j), (1), (m), (n), (o), (p), (q), (s), (t), (u), (v), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd), (zzf),....
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.... favour of the appellant, Translanka. 20. We now advert to the questions relating to whether receipt of commission in INR would amount to satisfaction of the conditions for exemption under the Service Tax Act. Prior to the issuance of the Export of Service Rules 2005, Circular No.56/5/2003 dated 25.04.2003 and Notification No.21/2003 dated 22.11.2003 held the field in relation to exemption for receipts from export of service. Both the Circular and Notification are extracted below: ST Circular No. 56/5/2003 25th April, 2003 F.No.254/1/2003-CX-4 Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs Sub:- Non levy of service tax on export of services - Regarding The Central Government has issued Notification no.2/2003 dated 1.3.2003 in the current year's Budget rescinding the earlier Notification no.6/99 Service Tax dated 9.4.99 which exempted taxable services from payment of service tax so long as payment for services rendered is received in convertible foreign exchange which is not repatriated outside India. Consequent to the issue of Notification no.2/2003 cited above, service tax would be leviable ....
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....ormed. 7. Trade Notice may be issued for the information of the trade. 8. The receipt of this Circular may kindly be acknowiedged. 9. Hindi version will follow. Manish Mohan Under Secretary to the Govt. of India Notification No. 21/2003-S. T., dated 20-11-2003 Service tax - Services for which payment received in India in convertible foreign exchange exempted In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services specified in sub-section (105) of section 65 of the said Act, provided to any person in respect of which payment is received in India in convertible foreign exchange, from the whole of the service tax leviable thereon under section 66 of the said Act. Provided that nothing contained in this notification shall apply when the payment received in India in convertible foreign exchange for taxable services rendered is repatriated from, or sent outside, India. 21. Both the Circular and Notification, make it clear that receipts from services s....
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....ion concerned with the subject-matterthe Reserve Bank of India. In this view, we hold that the proceedings of the Central Board of Direct Taxes dated March 11, 1986, declining to approve the agreements of the appellant with Sedgwick Offshore Resources Ltd., London, for the purposes of section 80-O of the Income-tax Act, are improper and illegal...... 23. In J.P.Boda, the Court notes, on a perusal of the nature of the transaction and the statement of remittances issued by the Reserve Bank of India, that the income had been expressed and received in convertible foreign exchange, in accordance with the Rules of the Reserve Bank of India. Hence, on facts, the Court finds that the commission payable to that assessee had been retained in foreign exchange only. 24. The Income tax Department had, in that case, insisted that there should be a remittance to the foreign insurers first, and thereafter, the payment of the commission to the assessee in foreign currency. This, the Court felt was unnecessary, as: (i) remittances to the foreign company had been made through the Reserve Bank of India in conformity with the agreement between the appellant and the foreign reinsurers ....
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....hat it retained from the premium amount. 29. According to the authority the services had been both rendered and consumed in India, and, as a result there had been no export of the services. Moreover, the commission ought to have been received in forex and the mere retention of the commission was insufficient to satisfy the condition under the Notification. 30. The Court noted that the premium had admittedly been received in convertible foreign exchange. From out of the premium, that assessee retained brokerage, and thereafter remitted the premium to the foreign re-insurance company. Hence, the retention of brokerage was out of the convertible foreign currency and the decision in Suprasesh (Foot Note Supra (10)) is also distinguishable on facts. 31. The assessee has also referred to a decision of the Tribunal in the case of Arafaath Travels Pvt. Ltd. (Foot Note Supra (9)) where the facts are almost analogous to the facts in the present case. The Tribunal has allowed that appeal following the decision in the case of Suprasesh (Foot Note Supra (10)), and the distinction in the procedure followed for effecting the remittances, has not been taken note of in that case. We are al....
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....m for exemption. 37. Based on the legal opinion, the Appellants had also written to the airline companies asking for the remittances to be made in foreign exchange and conveying to them the risk and anticipated tax liability in the methodology being followed. Despite this knowledge, they had proceeded with the transactions in the same manner, knowing fully well that they were not entitled to the exemption claimed. Thus, the elements of Section 74 were satisfied and the Department had made out a case for invocation of the extended period of limitation. This sequence of facts is admitted, and has been captured in the orders impugned. 38. We have heard the rival contentions on this score carefully and agree with the revenue. The investigations carried out by the Department revealed that correspondences had been exchanged with the airline companies from 2003 onwards on the subject of liability to service tax, and explaining the position under Indian law. A legal opinion had been obtained by the appellants in April 2004 that was adverse to the interests of the appellants. Hence, at least from then onwards, the assesses ought to have taken necessary action by amending their modus o....
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....lustrate, CREDIT NOTE No.125514/03-04 DT. 11.12.03 AND No.127016/03-04 DT.11.12.03 shows credit of Rs. 2,21,173.56 and Rs. 7,817.23 as ORC for Passengers and Cargo respectively for the month of November 2003. Likewise, for every month Srilankan Airlines have been issuing credit note favouring Translanka as GSA and that the amount in Indian Rupee to that extent credited to the Translanka's bank account. Translanka claimed that they received ORC in Indian Rupees upto August 2004 and from September 2004 onwards they received in foreign currency. 4.3.1. From the documents recovered, it is further observed that Translanka have been making correspondence with Srilankan Airlines about liability of Service Tax on the income so earned for the services rendered by them as GSA. Opinions from tax consultant were obtained, the details of some of which are discussed below, Translanka, however, has not chosen to register themselves with the Service Tax as GSA under the Business Auxiliary Services for discharging service tax in spite of receipt of income by way of ORC every month. 4.3.2 It appeared that Translanka at Chennai has clearly foreseen the liability of Service Tax o....
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....sfer funds directly to their bank account in India. From that letter, it is apparent that M/s Srilankan Airlines Ltd was having Office at Nagabramha Towers, No.76, Cathedral Road, Chennai and Sri J.D.Weimen was the Manager of M/s Sri Lankan Airlines Ltd. for India & Nepal at Chennai Office. As per the various credit notes like No.005/03-04/303 dated 22/10/2003 for Rs. 9,68,403.64 of M/s Srilankan Airlines Ltd., Sri P.Parameshwaran is the Finance & Administration Manager, India of M/s SriLankan Airlines Ltd. who was functioning in the Office at 76, Cathedral Road, Chennai in India. Therefore it is clear that the recipient of service viz., M/s.Srilankan Airlines Ltd. is having office in India in terms of erstwhile proviso to Rule 3(3)(i) of Export of Services Rules, 2005, as it stood prior to amendment on 19/04/2006 and proviso to Rule 3(1)(iii) and 3(2)(a) of the Export of Services Rules, 2005, as amended by the Export of Services (Amendment) Rules, 2006, with effect from 19/04/2006 vide Notification No.13/2006-S.T. Dt. 19/04/2006. As per the above said provisions, in respect of Business Auxiliary Services, Section 65(105)(zzb), if the recipient of captioned service viz., M/s. SriLa....
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....ANKA) received O.R.C. in Foreign Currency only from 19/11/2004. 4.4. From the foregoing internal correspondence exchanged, it appeared that TRANSLANKA, as a provider of Business Auxillary Service is consciously aware of the Service Tax liability arising out of ORC Receipts towards GSA services and that ways and means were discussed to wriggle out of liability through inward remittances, even though the suggestion did not take shape for the period from July 2003 to August 2004. 43. As far as ETA is concerned, the facts appear to be identical to the above and have been summarised in paragraphs 15.11 and 15.12 of the Order-in- Original, extracted below: 15.11. ETA has also contested that the extended period of limitation for demand of Service Tax is not attracted as they have not contravened any of the provisions of Finance Act, 1994 with intent to evade payment Service Tax. It is observed from the records that ETA are very well aware that their service as GSA for MAS are classifiable under Business Auxiliary Service and ORC earned by them would attract Service Tax. The legal opinion obtained by them from various sources also suggested that their service is liable....