Whether Refund claim of service tax of Business Auxiliary service provided outside India can be rejected on the ground that assessee is also providing AMC services of the same product in India?

PJ/Case Law/2019-2020/3617

CARL ZEISS INDIA PVT. LTD. Versus COMMISSIONER OF C. EX. & S.T., BANGALORE-I Final Order No. 21103/2018, dated 2-8-2018

Issue: - Whether Refund claim of service tax of Business Auxiliary service provided outside India can be rejected on the ground that assessee is also providing AMC services of the same product in India?

Brief Facts: - The appellant is engaged in promoting and selling ZEISS products in India which are medical, microscopy and metrology products. The appellant also undertakes the activity of procuring orders in India from buyers and delivering these purchase order to the overseas supplier. The order is processed and then executed by the overseas supplier making the shipment directly to the Indian customers. Consequently, appellants are also registered in the category of Maintenance and Repair Services, ever since they started the activity of AMC service. Further the appellant filed a rebate claim on the service tax paid on the commissions received for the business auxiliary services provided to various customers abroad, in terms of Rule 5 of the Export of Services Rules, 2005. The appellant aggrieved by the order of appellate authority filed appeal before CESTAT.

Appellant’s Contention: - The Appellant submit that the orders are delivered abroad and the services of minor installation and support services rendered in India and that these two services are different and cannot be considered as one and as such the benefit of rebate should not be denied to them. That though the services may start in India but are delivered outside India and hence the rejection of rebate is incorrect. The appellant further submit that the tax liability has not been passed on as proved by the certificate submitted by them in the adjudication proceedings and as such the question of unjust enrichment does not arise and therefore the rebate be sanctioned.

He submit that the impugned order is not sustainable in law as the same has been passed without considering the Circular No. 111/05/2009-S.T., dated 24-2-2009 issued by the Board wherein the Board has clarified that it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefit of these services accrue outside India. The appellant also submitted that the he undertake the activity of promoting and marketing the products of the overseas entity and such an activity is classifiable under Business Auxiliary Service as defined under Section 65(19) read with Section 65(105)(zzb) of the Finance Act, 1994. The appellant further submitted that the appellant paid service tax and claimed rebate of tax so paid in terms of Rule 5 of the Export of Services Rules, 2005 read with Notification No. 11/2005-S.T., dated 18-4-2005 and as per the notification to claim rebate of service tax paid, an assessee shall have exported services in terms of Rule 3 of the Export of Services Rules, 2005 and payment of such taxable service shall have been received in India in convertible foreign exchange.

It is his submission that the activity of Business Auxiliary Service is covered under sub-clause (1)(iii) of Rule 3 of Export of Services Rules, 2005. The Appellant further submitted that Rule 3(2) of Export of Services Rules, 2005 provides that the payment of such taxable service shall have been received in India in convertible foreign exchange which is not in dispute in the present case. Therefore, it is a settled legal position that the activity of Business Auxiliary Service fall under the category of Rule (1)(iii) and as long as it is established that the benefit of the service is accrued to a recipient outside India, the same is considered to be an export of service. In support of this submission, the appellant relied upon the various decisions and presented before CESTAT.

Reasoning of judgment:- The Tribunal finds that in the present case for a service falling under category of Rule 3 of Export of Services Rules, 2005 and all the conditions of the said rules are fulfilled in the present case. Further the Tribunal finds that the Board Circular No. 111/5/2009-S.T. 24-2-2009 has also clarified the meaning of the phrase “used outside India”

Further we find that which is reproduced herein below :-

Sub-rule (1) of rule 3 of the Export of Services Rules, 2005 categorizes the services into three categories :

(iii) Category III [Rule 3(1)(iii)] : For the remaining services (that would not fall under category I or II), which would generally include knowledge or technique based services, which are not linked to an identifiable immovable property or whose location of performance cannot be readily identifiable (such as, Banking and Other Financial services, Business Auxiliary services and Telecom services), it has been specified that they would be ‘export’, -

(a) If they are provided in relation to business or commerce to a recipient located outside India; and

(b) If they are provided in relation to activities other than business or commerce to a recipient located outside India at the time when such services are provided.

Further the Tribunal finds that the Tribunal in the case of Simpra Agencies v. CCE, Delhi-II [2014 (36) S.T.R. 430 (Tri. - Del.)], on identical facts and following the decision in the case of GAP International Sourcing (India) Pvt. Ltd. [2009 (15) S.T.R. 270 (Tribunal)] and Paul Merchants Ltd. [2013 (29) S.T.R. 257 (Tribunal)], remanded the matter holding that the assessee is to be entitled to rebate of service tax if the procedures and conditions prescribed in the notification followed and fulfilled. Further the Tribunal finds that in the case of Study Overseas Global (P) Ltd. v. CST, Delhi [2017 (3) G.S.T.L. 443 (Tri. - Del.)] wherein identical issue was involved and this Tribunal in para 8 has held as under: -

“8. Thus, the Export of Services being destination based is subject to Tax. Further, mere fact that the appellant has been promoting and marketing foreign universities within India and then getting prospective students enrolled for various courses in those universities does not mean that services to foreign universities were consumed within India. There is no dispute that service recipients are foreign universities and they are located outside India and payment for such services has been received in foreign currency. From the totality of facts and circumstances, there is no doubt that these services were provided from India and used outside India”.

The Tribunal has also relied upon the decision in the case of Microsoft Corporation (I) Pvt. Ltd. cited supra.

Decision:- In view of discussion the Tribunal are of the considered view that the ratios of the decisions above are fully applicable in the present case and by relying upon the ratios of the said decisions, the Tribunal hold that the impugned order is not sustainable in law and therefore and set aside the same by allowing the appeal of the appellant with consequential reliefs, if any.

Comments:- The Tribunal had rightly decided the matter that there is no doubt that services provided by the appellant were provided from India and these services were used outside India. All the conditions of the Rule 3 of Export of Services Rules, 2005 has been fulfilled in the present case by the appellant. So, the refund claim should be sanctioned to the appellant with Consequential relief.

Prepared by - Bharat Singh

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PJ/Case Law/2019-2020/3617

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