Custom, Excise & Service Tax Tribunal
Commissioner Of Service Tax-Iv Mumbai vs Prime Focus Ltd on 25 January, 2023
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
SERVICE TAX APPEAL NO: 87364 OF 2016
WITH
CROSS-BJECTION NO: 91173 OF 2016
[Arising out of Order-in-Original No: 60-63/STC-IV/MRRR/16-17 dated 16th
June 2016 passed by the Commissioner of Service Tax - IV, Mumbai.]
Commissioner of Service Tax - IV
12th Floor, Lotus Info Centre, Parel East
Mumbai - 400013 ... Appellant
versus
Prime Focus Ltd
Prime Focus House, Linking Road, Khar (W)
Mumbai - 400052 ...Respondent
APPEARANCE:
Shri Shambbhoo Nath, Principal Commissioner (AR) for the appellant Shri A R Krishnan, Chartered Accountant for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO: A / 85049 /2023 DATE OF HEARING: 26/07/2022 DATE OF DECISION: 25/01/2023 PER: C J MATHEW Aggrieved by dropping of demand with the finding that ST/87364/2016 2 consideration received was proceeds of export of services despite acceptance of proposal in show cause notice for classification of the activity that hinged on place of performance of service and on the finding that, for the 'negative list' era, the exceptions in Place of Provision of Service Rules, 2012 could not be invoked, Revenue is in appeal on the ground that the finding for the earlier period was not based on facts and that the finding for the later period had not interpreted 'goods' in accordance with law. In normal course, the respondent, M/s Prime Focus Ltd, would have no cause for grievance as the proposal in the show cause for recovery of ₹58,36,22,011/- had been dropped in entirety in order-in-original no. 60-63/STC-
IV/MRRR/16-17 dated 16th June 2016 of Commissioner of Service Tax-IV, Mumbai but the determination of classification with ramification on exports has prompted substantive memorandum of cross-objections on that finding. The dispute, thus, encompasses common ground as well as 'cause and consequence' contour for resolution.
2. That the impugned activities are, but for the factum of 'exports', taxable under Finance Act, 1994 is not in dispute; proceedings which were initiated alleging that, notwithstanding receipt of consideration from recipient of service based abroad in convertible foreign currency, the said service had been rendered in India did, however, culminate with the finding that partial rendering ST/87364/2016 3 of service outside India sufficed for exemption as provided for in Export of Service Rules, 2005. Non-availability of the characteristic of commodities that lent itself to ease of ascertainment of taxable event in the hitherto existing indirect levies as the touchstone for determining occurrence in intangible, and invisible, services necessitated rules of engagement for crystallizing the levy consistent with axiomatic consummation in the recipient save for specific exceptions; hence the segregation of enumerated services for such outliers in the said Rules for fastening the liability according to location of property and location of performance respectively. Denial of the exemption that, intuitively and sufficiently, should conflate with earnings in convertible foreign exchange and situating of the recipient abroad by fitment of the impugned activities within one of the outliers is sought to be unhinged by the counter of the respondent herein. Revenue has not set out any justification of such fitment in its appeal; hence, the conclusion arrived at by the adjudicating authority will have to be tested against the argument proffered by the respondent for deciding on the correctness of taxability under section 65(105)(zi) of Finance Act, 1994 in the impugned order and the appropriateness of correct application of proviso in rule 3(1)(ii) of Export of Service Rules, 2005 will need scrutiny only if the classification held by adjudicating authority survives.
3. It is also common ground that rule 4 of Place of Provision of ST/87364/2016 4 Service Rules, 2012 proposed for application in the show cause notice has been crafted exclusively for service rendered in relation to 'goods' or to 'individuals in person' and, of which, the former has been invoked. With the transition from enumerated taxable services, each having specific frame for classification, to the 'negative list' regime with effect from 1st July 2012, taxability contingent upon the limits of descriptions was no longer in vogue and the generalized connotation of 'taxable services' within the framework of section 65B(44) and section 66B of Finance Act, 1994 necessitated a new template for ascertainment of services having been rendered in the 'taxable territory' for operationalizing, and thereby according jurisdiction by 'location' for, the levy of service tax. Situation-specific alternatives were carved out for exceptions to the 'location of recipient' among which is 'place of performance on goods' in rule 4 of Place of Provisions of Service Rules, 2012 that was invoked in the show cause notice.
4. The impugned order has held that, in the absence of goods having been supplied by, or on behalf of, the recipient for the sole purpose of performance of activity thereon by the provider, the impugned provision in the said Rules would not apply. This is not contested in the appeal of Revenue which, however, relies upon certain judicial decisions to contend that 'goods', for the purpose of the said Rules, does not have to be tangible or corporeal.
ST/87364/2016 5
5. The dispute straddles the 'pre-negative list' and 'negative list' regimes with the first show cause notice issued for 2007-08 to 2011- 12 on 22nd October 2012 for recovery of ₹ 23,08,38,580/- followed by annual demand notices aggregating ₹ 35,27,83,431/- for 2012-13 to 2014-15. The impugned order, while dealing with taxability of the impugned activity in the two periods of service tax levy, has held that an amount of ₹ 14,41,123/- as consideration for 'equipment rental with support' had been erroneously included in the computation of demand for 2011-12 even though such consideration had been excluded in computation for the preceding years in the first notice for separate dropping and, by non-contest, limits the appeal of Revenue to ₹ 22, 93,97,457/-.
6. M/s Prime Focus Ltd, a pioneer in 'visual effects' and 3D technologies, incorporated two subsidiaries - in UK and the Netherlands - with downstream subsidiaries operating out of countries in the Americas and Europe who, contracting clients desiring specialized services, entrusted execution to the respondent herein. According to the respondent, the activities undertaken by them are conversion from '2D to 3D', 'imparting special effects', 'post production service', 'equipment rental with support' and 'digital asset management and content service' and 'digital restoration service', which are claimed to be 'business support service/information technology software service' and, which in accordance with rule 3 of ST/87364/2016 6 Export of Service Rules, 2005 fulfill entitlement for exemption as exports. That was sought to be controverted in the show cause notice contending that the activities conform to section 65(105)(zi) of Finance Act, 1994 owing to provider being 'video production agency' in section 65(119) in relation to 'video-tape production' in section 65(120) of Finance Act, 1994 which would not be 'exports' unless the whole, or part, of the performance is undertaken outside India for the period prior to 1st July 2012.
7. From '30.3 Assessee along with their reply dated 09.11.2015 submitted confirmation letters received from their Subsidiaries. In all of them it stated that;
"5. The scope of services provided by M/s PFL to us involved the following:
i. Understanding client requirements which inter alia requires travel by PFL personnel to our location or our client's location for meetings(s) ii. with us/our clients to understand the expectations / requirements of the job.
iii. Processing the content give by us to PFL through telecommunication links as per our / our client's requirements which inters alia involved -
a) Conversion of films from 2D to 3D, imparting special visual effects in motion picture films and other post production services related to motion picture films with the help of software known as 'View-D™' owned by us;
b) Making the content ready for delivery including providing software (executable files) for making use of the final content; and ST/87364/2016 7
c) Delivery of content to us through telecommunication links.
iv. Post-delivery of content attending review/quality control meetings which involved travel by PFL's personnel to our location/our clients' location as to finalize the deliverables expected from PFL.
v. The travel cost incurred by PFL is recharged to us along with an appropriate mark-up which we pay in the currency that is billed to us"..' as well as '2.5) Analysis of different activities by the Assessee in the letter dated 13.08.2012:
(i) Post Production Services: The assessee have stated at para 2.2.1 of the letter dated 13.08.2012 that 'Post Production activity' is generally understood in the film industry as being that part of film making process after the actual end of shooting and/recording the performance so as to make it fit for release. The process of editing, cutting, coloring, dubbing, title printing, imparting special effects, processing, adding, modifying or deleting sound etc. are some of the illustrative activities that are done after the process of recording of the performances, to prepare the content for release.
(ii) Conversion of motion picture film shot originally in 2D to 3D: The assessee have stated at para 2.1.1 of the letter dated 13.08.2012 that they convert the films from 2D into 3D by using ViewD software. The process of conversion from 2D to 3D involves the following :
Tasking i.e. marking up still images for each shot to be converted, Rotoscoping i.e. isolating specific (or all) objects ST/87364/2016 8 within a frame and cutting them out, 2D to 3D content conversion using the software i.e. creating stereo depth from an image that was originally shot as a flat single image by generating a second eye and sculpting depth with computer software, Paint, i.e. painting in, or recreating through paint software, missing portions of a photographed image that are revealed by the conversion process, Checking the final content for quality and delivering the same to the client.
(iii) Imparting special effects: The Assessee stated at para 2.1.2 of the letter dated 13.08.2012 that they are doing the following things in this part:
For example, a scene shot in normal background has to be shown in a 'crowd'.
Prime Focus Ltd, using computer graphic designing techniques edits the portion of the scene and makes it look as if it were shot in a 'crowd'.
(iv) Digital Restoration Services: The Assessee have stated at paras 2.5.1 and 2.5.2 of the letter dated 13.08.2012 that they provide the services in relation to 'film preservation' which involve the following activities:-
Diagnosing and cleaning the physical film reel of dirt and dust and repairing film tears.
The images in each frame of the film are digitized i.e. converted from 'analogue' to 'digital' form using a special scanner. The images are saved in digital files ST/87364/2016 9 on a computer's hard disk. The conversion is necessary since 'digital' format is capable of being edited and corrected more easily.
The scanning is further fine-tuned by correcting errors in scanning, removing information unnecessary for restoration, film segmentation based on scene analysis, and so on.
The distortions in the images such as spots, lines, vibrations, flickers, etc.; colour, brightness and contrast variations; missing frames; noise etc are corrected using specialised computer software and relevant hardware / machines.
Once the above processes are complete in all respects the image sequences are recorded on proper digital media such as Digital Video Discs (DVDs) / Blue-ray Discs (BDs) / Hard Disk and delivered to the client through telecommunication means.' in the first of the notices, to which our particular attention was drawn by Learned Authorized Representative, an overview of the impugned activities is available.
8. That led service tax authorities, including the adjudicating authority, to the inference that these activities were the intendment of '(86a) "Programme" means any audio or visual matter, live or recorded, which is intended to be disseminated by transmission of electro-magnetic waves through space or cables intended to be received by the general public either directly or indirectly through the medium of relay stations;' ST/87364/2016 10 in section 65 of Finance Act, 1994 and which would be within the ambit of 'recording of any programme' in section 65(120) of Finance Act, 1994, defining 'video-tape production' to conclude that the noticee was provider of the related service for the period prior to 1st July 2012.
9. For the period from 1st July 2012, service tax authorities proposed the applicability for 4(a) of Place of Provision of Service Rules, 2012 which shifts the place of provision from the location of the recipient of service to the place where the service is actually performed signified by the temporary stationing of the corresponding goods upon which a provider worked. The adjudicating authority held that the flow of activities undertaken by the respondent involved 'finishing' undertaken outside the country to which proviso in rule 3(1)(ii) applied and, relying upon circular no. 144/13/2011-ST dated 18th July 2011 of Central Board of Excise & Customs (CBEC) clarifying that '2. ........This would include not only the physical part of providing the service but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice. Such auxiliary activities could include activities like measurement, quality testing etc which may be essential pre-requisites for identification of completion of service. The test for the determination whether ST/87364/2016 11 a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice. However such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice.' came to the conclusion that service so rendered was not within the country and, hence, not taxable. In the grounds of appeal, it has been averred that the adjudicating authority did not have any basis for concluding that such activity was indeed executed outside India and that evidence of travel by executives did not suffice to arrive at that conclusion. Reliance on the circular was also countered with the argument that the contextual reference pertains to an entirely different set of activities.
10. Learned Authorised Representative referred to the clear and unambiguous finding in the impugned order that the activities lay within the ambit of section 65(105)(zi) of Finance Act, 1994 and the necessity, thereby, of conformity with rule 3(1)(ii) of Finance Act, 1994 for exemption from taxability. He laid particular emphasis on the portions of the show cause notice extracted supra and, in particular to '30.3......
iv. Post-delivery of content attending review/quality control meetings which involved travel by PFL's personnel to our location/our clients' location as to finalize the ST/87364/2016 12 deliverables expected from PFL.
v. The travel cost incurred by PFL is recharged to us along with an appropriate mark-up which we pay in the currency that is billed to us",' in reply dated 9th November 2015 to show cause notice to urge that the adjudicating authority had placed a wrong construct on the travel of certain personnel to the location of customers as adjunct to the service without any evidence for such inference.
11. According to Learned Chartered Accountant appearing for the respondent, the entire case of service tax authorities, and now sought to be reiterated in appeal, has been erected, for the period prior to 1st July, 2012, on the shaky foundation of the activity as 'video-tape production' which is not consistent with the decisions of the Tribunal in Prasad Corporation Ltd v. Commissioner of Service Tax, Chennai [2018 (11) GSTL 104 (Tri.-Chennai)] and, thereafter, in Prasad Corporation Ltd v. Commissioner of Service Tax, Chennai-II [2021 - TIOL-44-CESTAT-MAD] as well as in Prasad Corporation Ltd v. Commissioner of GST & Central Excise, Chennai [(2019) 101 taxamann.com 460 (Chennai-CESTAT(17-12-2018)] with particular reference to '4. Heard both sides and have gone through the facts. It is clear that the services performed by the appellant definitely do not involve his recording of any programme, event or function. In fact, this aspect has been considered even by the ST/87364/2016 13 adjudicating authority in para 5.3 of the order. The activities of services of Computer Graphics, Digital Restoration, and Reverse Telecine all involving activities on old feature films is definitely a post-production film activity inter alia, rendered for service recipients abroad as per their requirements. This being so, we are not able to fathom how the adjudicating authority, having stated that the appellants are not engaged in the recording of any programme etc. has concluded that services or restoration, giving special effects etc. on the old films would be a "Video Tape Production". Ostensibly, the department and the adjudicating authority have been influenced by the second limb of the definition of "Video Tape Production" in Section 65(120) of the Act. The definitions have to be read in totality and part thereof cannot be picked up to justify that the activities performed in the instant case will come under "Video Tape Production Services". That would like putting the cart before the horse. The statutory provisions relating to taxation have to be construed literally without engraving any additional meaning thereto except in very rare cases where, the maxim of casus omissus would apply. This is certainly not one of those situations. The definition of "Video Tape Production Service" is very clear and does not offer any ambiguity.' Referring to circular no. 80/10/2004-ST dated 17th September 2004 of Central Board of Excise & Customs (CBEC), elaborating upon incorporation of 'TV and radio programme production' in section 65(105) of Finance Act, 1994, he contended that it clearly did not cover the activities undertaken by them.
12. Revenue has proceeded to resort to the specific outlier in Export ST/87364/2016 14 of Service Rules, 2005 on the finding that the activity of the respondent, for the period prior to 1st July 2012, is 'to any person, by a video production agency in relation to video-tape production, in any manner' covered by section 65(105)(zi) of Finance Act, 1994 by coverage within '(119) "video production agency" means any professional videographer or any commercial concern engaged in the business of rendering services relating to video-tape production;' in section 65 of Finance Act, 1994. It is clear from the description in the 'taxable service' that it is intended to subject activity of either 'professional videographer' which, by definition referring to individual person excludes respondent, or of 'any commercial concern engaged in the business of rendering services relating to 'video-tape production' to tax. As "video-tape production" means the process of any recording of any programme, event or function on a magnetic tape or on any other media or device and includes services relating thereto such as editing, cutting, colouring, dubbing, title printing, imparting special effects, processing, adding, modifying or deleting sound, transferring from one media or device to another, or undertaking any video post-production activity, in any manner;
in section 65(120) of Finance Act, 1994 is essential to determination ST/87364/2016 15 of respondent as acceptable provider of the impugned service, its components are critical to evaluation of the proposition of Revenue for narrowing down to this particular 'taxable service' and, thus, deny exemption otherwise available on establishing that recipient outside the country had paid for it in convertible foreign exchange.
13. The inclusive leg of the definition pertains to the post-recording activity on video or transfer to another media by provider of service to qualify as 'video-tape production'; there is no evidence that the material received by the respondent was recorded in video or that the respondent had, at any time, handled video as media. There is nary an allegation that respondent had undertaken any activity covered by the principal leg of the definition. Furthermore, the entirety of the basis for the impugned classification is that 'programme' is involved in the activity for which section 65(86a) of Finance Act, 1994 has been drawn upon as noted by us supra.
14. The adjudicating authority appears to have failed to take note of the arrangement in section 65 of Finance Act, 1994 in which several of the definitions therein are intended as adjuncts of specific 'taxable service' enumerated in section 65(105) of Finance Act, 1994 and must, therefore, be read in the context of those definitions. That should have been obvious from the rest of the definition placing emphasis on 'reception by general public through either directly or ST/87364/2016 16 indirectly' and, therefore, relate to the taxable service described in section 65(105)(zzu) of Finance Act, 1994. The enumeration of 'taxable services' prior to 1st July 2012 implicitly recognizes segregation from other services, and without any overlap whatsoever, permitting staged incorporation of several components of 'end-to-end' activity in a specific sector with section 65(105) of Finance Act, 1994 at different times. The definition of an element contained in a particular 'taxable service' is not to be drawn upon, as a lexicon may be, for stretching of another service beyond legislatively intended limits. Even if it could, it would be a leap of faith by service tax authorities to conclude that visual dissemination is always of a 'programme' and, therefore, on 'video' as media. No evidence is forthcoming either that such is the case in the present factual matrix. From the description of the process flow, referred to supra, it would appear that the transmission occurs electronically and did not exist on the media intended by section 65(120) of Finance Act, 1994. Therefore, the classification of the service adopted by the adjudicating authority, concurring with the proposal in the show cause notice, is not in consonance with the intent of section 66 of Finance Act, 1994.
15. Consequently, while Revenue is correct in its stand that the adjudicating authority had not examined, in the absence of evidence, their partial performance of service was rendered outside India, such argument is academic in the light of failure of the classification ST/87364/2016 17 adopted by which alone rule 3(1)(ii) of Export of Service Rules, 2005 had been invoked and appeal of Revenue has been rendered inconsequential.
16. Insofar as the finding of the adjudicating authority for period after 1st July 2012 is concerned, appeal of Revenue contends that the interpretation assigned to goods as having to be, without exception, tangible for invoking rule 4 of Place of Provision of Service Rules, 2012 is contrary to judicial decisions. It was also averred that such narrow construction of 'goods' was not the intent of rule 4 of Place of Provision of Service Rules, 2012.
17. Learned Authorized Representative argued that the adjudicating authority had placed an erroneous construction on the scope of activity covered in rule 4(a) of Place of Provision of Service Rules, 2012 by misapplication of paragraph 5.4.1 of Service Tax Education Guide. According to him, this error is apparent from notification no. 134/94-Cus dated 22nd June 1994 which amplifies 'maintenance' to include 'service' in the context of cross-border transactions. He placed reliance on the decision of the Hon'ble Supreme Court in Associated Cement Company Ltd. v. Commissioner of Customs [2001 (128) ELT 21 (SC)] and, in particular, on the finding that '30. It is true that what the appellants had wanted was technical advice or information technology. Payment was to be made for this intangible asset. But the moment the ST/87364/2016 18 information or advice is put on a media, whether paper or diskettes or any other thing, that what is supplied becomes chattel. It is in respect of the drawings, designs, etc., which are received that payment is made to the foreign collaborators. It is these papers or diskettes, etc., containing the technological advice, which are paid for and used. The foreign collaborators part with them in lieu of money. It is, therefore, sold by them as chattel for use by the Indian importer. The drawings, designs, manuals, etc., so received are goods on which customs duty could be levied.' According to him, the Hon'ble Supreme Court in Tata Consultancy Services v. State of Andhra Pradesh [2004 (178) ELT 22 (SC)] had elaborated upon the scope of 'goods' thus '24. In our view, the term "goods" as used in Article 366(12) of the Constitution of India and as defined under the said Act are very wide and include all types of movable properties, whether those properties be tangible or intangible. We are in complete agreement with the observations made by this Court in Associated Cement Companies Ltd. (supra). A software programme may consist of various commands which enable the computer to perform a designated task. The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become "goods". We see no difference between a sale of a software programme on a CD/floppy disc from a sale of music on a cassette/CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property ST/87364/2016 19 has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software and the media cannot be split up. What the buyer purchases and pays for is not the disc or the CD. As in the case of paintings or books or music or films the buyer is purchasing the intellectual property and not the media i.e. the paper or cassette or disc or CD. Thus a transaction sale of computer software is clearly a sale of "goods" within the meaning of the term as defined in the said Act. The term "all materials, articles and commodities" includes both tangible and intangible/incorporeal property which is capable of abstraction, consumption and use and which can be transmitted, transferred, delivered, stored, possessed etc. The software programmes have all these attributes.
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71. A software may be intellectual property but such personal intellectual property contained in a medium is bought and sold. It is an article of value. It is sold in various forms like - floppies, disks, CD-ROMs, punch cards, magnetic tapes, etc. Each one of the mediums in which the intellectual property is contained is a marketable commodity. They are visible to senses. They may be a medium through which the intellectual property is transferred but for the purpose of determining the question as regard leviability of the tax under a fiscal statute, it may not make a difference. A programme containing instructions in computer language is subject matter of a licence. It has its value to the buyer. It is useful to the person who intends to use the hardware, viz., the computer in an effective manner so as to enable him to obtain the desired results. It indisputably becomes an object of trade and commerce. These mediums containing the intellectual property are not only easily available in the market for a ST/87364/2016 20 price but are circulated as a commodity in the market. Only because an instruction manual designed to instruct use and installation of the supplier programme is supplied with the software, the same would not necessarily mean that it would cease to be a 'goods'. Such instructions contained in the manual are supplied with several other goods including electronic ones. What is essential for an article to become goods is its marketability.
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74. It is not in dispute that when a programme is created it is necessary to encode it, upload the same and thereafter unloaded. Indian law, as noticed by my learned Brother, Variava, J., does not make any distinction between tangible property and intangible property. A 'goods' may be a tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to
(a) its utility; (b) capable of being bought and sold; and (c) capable of transmitted, transferred, delivered, stored and possessed. If a software whether customized or non- customized satisfies these attributes, the same would be goods. Unlike the American Courts, Supreme Court of India have also not gone into the question of severability.' Furthermore, he contends that the Hon'ble Supreme Court has, in Bharat Sanchar Nigam Ltd v. Union of India [2006 (2) STR 161 (SC)], held that '57. We will proceed on the basis that incorporeal rights may be goods for the purposes of levying sales tax. Assuming it to be so, the question is whether these electromagnetic waves can fulfil the criteria laid down in Tata Consultancy for goods. In our opinion the question must be answered in the ST/87364/2016 21 negative. Electromagnetic waves have been described in Telecommunications Law : David Gilles & Roger Marshal:
Butterworths :-
"1.14. Electromagnetic waves travel through free space from one point to another but can be channeled through waveguides which may be metallic cables, optical fibres or even simple tubes. All electromagnetic waves are susceptible to interference from one another and unrelated electrical energy can distort or destroy the information they carry. To reduce these problems they have been organized within the spectrum into bands of frequencies or wavelengths for the transmission of particular types of services and information."
The process of sending a signal is as follows :-
"Data is superimposed on a carrier current or wave by means of a process called modulation. Signal modulation can be done in either of two main ways: analog and digital. In recent years, digital modulation has been getting more common, while analog modulation methods have been used less and less. There are still plenty of analog signals around, however, and they will probably never become totally extinct.
Except for DC signals such as telegraph and baseband, all signal carriers have a definable frequency or frequencies. Signals also have a property called wavelength, which is inversely proportional to the frequency". (Encyclopedia of Technology Terms of Techmedia)
58. It is clear, electromagnetic waves are neither abstracted nor are they consumed in the sense that they are not extinguished by their user. They are not delivered, stored or possessed. Nor are they marketable. They are merely the medium of communication. What is transmitted is not an electromagnetic wave but the signal through such means. The signals are generated by the subscribers themselves. In telecommunication what is transmitted is the message by means of the telegraph. No part of the telegraph itself is transferable or deliverable to the subscribers.'
18. Learned Authorized Representative also placed reliance on the ST/87364/2016 22 decision of the Tribunal in Crompton Greaves Ltd v. Commissioner of Central Excise, Aurangabad [2015-TIOL-2724-CESTAT-MUM] and in Roha Dyechem Pvt Ltd v. Commissioner of Central Excise, Raigad [2017-TIOL-3448-CESTAT-MUM].
19. Learned Chartered Accountant submitted that rule 4 of Place of Provision of Service Rules, 2012 would come into play only when goods, on which activity is to be undertaken by the provider of service, are supplied to India by the recipient of the service. He argued that the reliance placed on the decisions of the Tribunal in re Crompton Greaves Ltd and re Roha Dyechem Ltd are not relevant as the said views are inconsistent with that adopted by the Tribunal in Commissioner of Service Tax, Ahmedabad v. B A Research India Ltd [2010 (18) STR 439 (Tri-Ahmd.)], in Commissioner of Central Excise, Ludhiana v. Nestle India Ltd [2014 (36)STR 563 (Tri.-Del.)] and in C3i Consultants India Pvt Ltd v. Commissioner of Central Excise, Customs & Service Tax, Hyderabad - II [2014 (35) STR 556 (Tri.-Bang.)] and, therefore, is no precedent.
20. It appears that service tax authorities have not appreciated the purpose, elucidated supra, and the context of Place of Provision of Service Rules, 2012. These Rules do not operate as a charging provision within the narrow field of taxing imports or exempting exports; they are intended for taxing all manner of services within the ST/87364/2016 23 frame of section 66B of Finance Act, 1994. The Hon'ble Supreme Court, in All India Fedn. of Tax Practitioners v. Union of India [2007 (7) STR 625 (SC)] has held levy under Finance Act, 1994 to be 'destination-based consumption tax' and, therefore, requiring consummation of the service to be linked to acknowledgement by recipient of the service. Consequently, by default, rule 3 of Place of Provision of Service Rules, 2012, holds the service to have been rendered at the place of the recipient and other rules substitute in specific circumstances. It would not be consistent with the intent of tax if the location of the tangible object, on which service is contractually intended to be performed on, is ignored in favour of the default provision. Hence the deviation in rule 4(a) of Place of Provision of Service Rules, 2012 and, considering the specific circumstance of determination by tangible presence, it would not be amenable to stretching for coverage of 'deemed goods', if any, owing to that limitation of pinpointing 'service' which is of essence in the said Rule.
21. The judgments in re Bharat Sanchar Nigam Ltd and in re Tata Consultancy Services, cited by Learned Authorized Representative, were rendered in disputes over attempted escapement from levy of tax on 'sale of goods' which, but for deeming provision in Article 366 6of the Constitution, is restricted to physical goods and, in determining the scope of escapement, held so in specific context. That does not ST/87364/2016 24 hold for specific tax on 'services' within the legislative jurisdiction of Union of India and would certainly not for ascertainment of services having been exported within the prescription in rule 6A of Service Tax Rules, 1944. The premise on which Revenue has put forth its appeal for the period after 1st July 2012 is not tenable logically or legally.
22. For the above reasons, the appeal of Revenue fails and, with the cross-objection thus disposed off, the impugned order is sustained to the extent of determination that the respondent herein has exported services in accordance with Export of Service Rules, 2005 and rule 6A of Service Tax Rules, 1994 for the relevant periods.
(Order pronounced in the open court on 25/01/2023) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as