AI Drafter 
TaxTMI 
TaxTMI 
2026 (4) TMI 1742
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....d services to South Western Railway and also executed services as a sub-contractor under a contract involving its foreign affiliate in connection with the DAMEL project. Exemption under Notification No. 24/2009-ST was claimed for the domestic services, while the DAMEL-related services were claimed as export on the ground that invoices were raised in foreign currency and consideration was received in convertible foreign exchange. A Show Cause Notice dated 17.04.2015 proposed demand of service tax, along with interest and penalty, which was confirmed by Order-in-Original and partly allowed by the Commissioner (Appeals) vide Order-in-Appeal dated 09.05.2017 after due process of Law. 2. Aggrieved by the portion of the Order-in-Appeal adverse to them, the Appellant has filed the present appeal before this Tribunal. 3. The Ld. Advocate Mr. Karthick Sundaram appeared on behalf of the Appellant. The Ld. Authorized Representative Ms. Anandalakshmi Ganeshram appeared for the Revenue. 4. The Ld. Counsel for the Appellant submitted that: - i. the services rendered to South Western Railway are squarely covered under "management, maintenance or repair" of railways and are fully....
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.... of services rendered by the Appellant under two distinct contractual arrangements, namely (i) services provided to South Western Railway within India, and (ii) services rendered to a foreign principal under a subcontracting arrangement in connection with a project relating to Delhi Airport Metro Express Ltd. (DAMEL). Both sets of transactions are required to be examined in the context of classification, exemption and export of services under the Finance Act, 1994 and the Export of Service Rules, 2005. 9.2 The first limb of the issue relates to services rendered to South Western Railway, which are evidenced by two invoices and the corresponding contractual documents placed on record. On careful perusal of these records, it is evident that the Appellant has undertaken activities such as maintenance, overhaul and testing of air dryers forming part of railway locomotives. 9.3 The nature of these activities is technical and execution-oriented, involving physical servicing and functional restoration of equipment that is integral to railway operations. These services cannot be categorized as advisory or consultancy in nature. The classification adopted by the D....
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....eated as export if the recipient of service is located outside India and the consideration is received in convertible foreign exchange. The rule does not mandate that the place of performance or the location of ultimate consumption should be outside India. 9.9 In this context, CBEC Circular No. 111/05/2009ST dated 24.02.2009 clarifies that services performed in India may still qualify as export if the benefit of such services accrues to a recipient located outside India. The said circular further emphasizes that the relevant factor is the location of the service recipient and not the place where the service is performed. 9.10 This position has been reiterated in CBEC Circular No. 141/10/2011-TRU dated 13.05.2011, wherein it has been clarified that export status is to be determined based on the location of the recipient of service and not the place of performance. 9.11 The legal position is further settled by the Larger Bench of the Tribunal in Paul Merchants Ltd. v. CCE, Chandigarh, 2013 (29) S.T.R. 257 (Tri.-LB), wherein it was held that the relevant test for determining export is the location of the service recipient and not the ultimate beneficiary. The Tribunal categor....
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....ered. In this regard, it is well settled that procedural lapses cannot defeat substantive benefit. The Hon'ble Supreme Court in Mangalore Chemicals & Fertilizers Ltd. v. Deputy Commissioner, 1991 (55) E.L.T. 437 (S.C.), and the Tribunal in Auro Laboratories Ltd. v. CCE, 2016 (344) E.L.T. 391 (Tri.-Chennai), have held that exemption cannot be denied on account of procedural infractions when the substantive conditions stand satisfied. In the present case, the nature of services, contractual arrangements and receipt of consideration are not in dispute. Therefore, the denial of exemption on procedural grounds is unsustainable. 9.19 In view of the foregoing analysis, we hold that the services rendered to South Western Railway are exempt under Notification No. 24/2009-ST as amended and the services rendered to a foreign principal under a subcontracting arrangement in connection with the DAMEL project qualify as export of services and are not liable to service tax. Accordingly, the entire demand under Issue No. (i) is unsustainable on merits and is liable to be set aside. Issue No (ii): Limitation and Penalty 10.1 The Show Cause Notice in the present case has been issued on 17....