Service tax leviability on commission earned for transferring foreign remittance.

PJ/Case Law/2014-15/2380

Case:-WALL STREET FINANCE LTD, WEIZMAN FOREX LTD Vs COMMISSIONER OF SERVICE TAX, MUMBAI

Citation:-2014-TIOL-1958-CESTAT-MUM

Brief facts:-The appellants, M/s. Wall Street Finance Ltd. and M/s. Weizman Forex Ltd. were engaged by M/s. Western Union as agents for transfer of money from abroad to persons situated in India. As per the directions of the Western Union, the appellants either directly or through sub-agents delivered the money to the intended beneficiaries in India. The appellants received commission in convertible foreign exchange from M/s. Western Union for the services rendered. The department was of the view that since the services have been rendered in India, the appellants are liable to tax on the commission received under reverse charge mechanism. Accordingly, notices were issued and the demands confirmed.

Appellant’s contention:-The learned Chartered Accountant representing the appellants submitted that the nature of the services undertaken is transfer of money from abroad for the remitters situated abroad through Western Union. Thus, the service provider for the money transfer service is Western Union. The appellants are engaged for completion of the transactions as intermediaries. The appellants receive commission for the services rendered in convertible foreign exchange. As far as the appellant is concerned, they have rendered a service to M/s. Western Union, who has paid the consideration for the services rendered. Since Western Union is situated abroad, the services are deemed to have exported out of India and therefore, no service tax liability would accrue. The nature of the service rendered would merit classification under “Business Auxiliary Service” (BAS) for the purpose of export of service under Export of Service Rule, 2005. BAS is classified under Rule 3 (1) (iii) of the said Rules and the conditions required to be satisfied for export are the services should be provided in India and used outside India and the consideration should be received in convertible foreign exchange. It is his submission that in this case no doubt the appellant/service provider has provided services and therefore, the service has been provided in India. As far as the usage of service is concerned, the recipient is Western Union, who is situated abroad and therefore, services have been used outside India. Consideration has been received in convertible foreign exchange. Thus the conditions required for classification as export of services are clearly satisfied. The learned Consultant relies on the decision of this Tribunal in the case of Paul Merchants Ltd. Vs. CCE, Chandigarh - 2013 (29) STR 257 (Tri-Del) = 2012-TIOL-1877-CESTAT-DEL, CCE Vs. Fine Forex Pvt. Ltd. -2014-TIOL-328-CESTAT-DEL and Gap International Sourcing (India) Pvt. Ltd. Vs. CST - 2014-TIOL-465-CESTAT-DELwherein also in similar situations, this Tribunal held that transaction involved amounted to export of service. Therefore, in the present case also it is his submission that the transaction be treated as export of service and the service tax demand confirmed be set aside

Respondent’s contention:-The learned Additional Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority. It is his submission that since the beneficiary is situated in India it should be held that service has been rendered in India. He also submits that the Revenue has challenged the decision of this Tribunal in the case of Paul Merchants Ltd. case and therefore, the said decision cannot be relied upon as the basis for taking a view on the matter.

Reasoning of judgment:-There is no dispute about the certain basic facts involved in the appeal. The service recipient in the transaction is M/s. Western Union, who is situated abroad. There is also no dispute that consideration for the service rendered has been received in convertible foreign exchange. The only dispute is where the service has been rendered. At the relevant time, there were no specific rules to determine the place of provision of service in service tax law. However, with effect from 20/06/2012 a specific Rule has been prescribed called Place of Provision of Service Rules, 2012. Though these Rules are only prospective in nature, the provisions of these Rules can be gainfully used to understand the concept of place of provision. Rule 3 of the Rule says that the place of a provision of a service shall be the location of the recipient of the service. In the facts of the present case, the service receiver is M/s. Western Union, who has paid the consideration for the service and who is situated outside India and therefore, the place of provision of service should be treated as falling outside India.

In an identical set of facts in the case of Paul Merchants ltd. (supra) and Fine Forex Pvt. Ltd. (supra) this Tribunal held that the transaction would amount to export of service and hence no service tax would be leviable. Following the ratio of these decisions and the applying the same to the facts of the present case, we are of the view that the services undertaken by the appellant to Western Union amounts to export of service and hence, not taxable in India.

Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any, in accordance with the law.

Decision:-Appeal allowed.

Comment:- The crux of this the case is that commission earned for transferring the foreign remittance is in the nature of export of service and consequently, no service tax is payable on the same. One important point to be noted in this case is that the Tribunal has considered the applicability of Rule 3 of the Place of Provision of Service Rules, 2012 even for the prior period so as to determine the place of provision of service.

Prepared By:- Lovina Surana

Comments

PJ/Case Law/2014-15/2380

Post a Comment

Query