Custom, Excise & Service Tax Tribunal
Futureworks Media Limited vs The Commissioner Cgst-Mumbai West on 6 June, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
MUMBAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 85927 of 2021
(Arising out of Order-in-Original No. MUM/CGST/MW/COMMR/AK/56/2020-21
dated 27.02.2021 passed by the Commissioner of CGST, Mumbai West, Mumbai)
FutureWorks Media Limited .... Appellants
G.G. House, 42,
Irish Park, Juhu
Mumbai - 400 049.
Versus
Commissioner of CGST, Mumbai West .... Respondent
Mahavir Jain Vidyalaya, CD Burfiwala Marg,
Juhu Lane, Andheri (West)
Mumbai - 400058.
Appearance:
Shri Gopal Mundra a/w Ms Geenita Bodani, Advocates for the Appellant
Shri Adeeb Pathan, Authorized Representative for the Respondent
CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL)
FINAL ORDER NO. A/85562/2024
Date of Hearing: 07.02.2024
Date of Decision: 06.06.2024
PER: M.M. PARTHIBAN
This appeal has been filed by M/s FutureWorks Media Limited,
Mumbai (herein after referred to, for short, as "the appellants") assailing
the Order-in-Original No.MUM/CGST/MW/COMMR/AK/56/2020-21 dated
27.02.2021 (hereinafter referred to, for short, as "the impugned order")
passed by the Commissioner of CGST, Mumbai West, Mumbai.
2.1 The brief facts of the case are that the appellants herein are inter alia
engaged in providing visual effects (VFX) services, imparting special
effects and providing other post-production services to various film
production and media houses located in India and outside India. For the
purpose of discharge of service tax, the appellants were registered with
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jurisdictional CGST/Service Tax Commissionerate and was paying service
tax under the taxable service category of video production agency, video
tape production service, Supply of Tangible Goods for Use (STGU) service.
The services provided by the appellants were in the nature of editing,
cutting, colouring, dubbing, title printing, adding/modifying or deleting
sound, imparting special effects etc. on the post-production of film shots,
record of performance in film in order to make the movie fit for release.
Some of the techniques used in such activities include (i) roto-scoping i.e.,
tracing over motion picture footage, frame by frame, to produce certain
realistic action or isolate an image or add different background etc., (ii)
compositing and painting i.e., Combining separate single image or
sequence, to create an illusion that all those elements are parts of same
scene; and (iii) 3D tracing or match move i.e., technique of insertion of
computer graphics into live action footage, all of the above involving
manipulation of recorded images, film scenes by use of information
technology software. In respect of the services provided to the film
production and media houses located in India, the appellants had
discharged the applicable service tax, whereas in respect of such service
receivers located outside India, the appellants had treated the same as
export of services and did not discharge service tax.
2.2 During the course of EA-2000 audit of the records of the appellants
for the period 01.07.2012 to 30.06.2017, the Department had interpreted
that the appellants on account of incorrect application of Place of Provision
of Services Rules, 2012 (POPS) did not pay service tax by treating the
services provided to overseas clients as export of services. Further, the
department contended that the appellants provide post-production service
only after receiving detailed specifications from a client regarding the
activity performed on the product provided by such client. As the client
provides the appellants with few scenes of an already short movie to work
upon and enhance the visual effects, the services provided by the
appellants is essentially service performed on a product. Therefore, the
Department came to the conclusion that services provided by the
appellants will fall within the scope of Rule 4(a) of POPS Rules by treating
the place of provision of services as the location where the services are
actually performed and thus contended that they are liable to pay service
tax on those services accounted by them as export of services. In this
regard, Show Cause Notice (SCN) dated 18.04.2018 was issued proposing
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for recovery of service tax for the period July, 2012 to March, 2017 under
Section 73(1) of the Finance Act, 1994 invoking extended period along
with applicable interest under Section 75 ibid, besides proposing for
imposition of penalty for suppression of information on taxable services,
omission or commission of action with an intent to evade payment of
service tax under Section 78 and penalty under Section 77 ibid. The SCN
was adjudicated by the learned Commissioner in confirmation of the
adjudged demands by issue of the impugned order. Feeling aggrieved with
the above Order-in-Original dated 27.02.2021 the appellants have
preferred this appeal before the Tribunal.
3.1 Learned Advocate has submitted that the appellants are engaged in
providing post-production activities of editing, cutting, colouring, dubbing,
title printing, adding/modifying or deleting sound, imparting special effects
etc. by rendering Visual effects (VFX) on already shot film or recorded
performance which are provided to the appellant as a mere frame i.e.,
without sound. Inasmuch as the services provided by the appellant are
received by their clients abroad, who is the sole user of such film or movie
after merging the audio and video part of the frames, and as these frames
as provided to the appellants and their contents do not have any value to
be used as intangible goods, such services worked upon by the appellant
cannot be treated as taxable under the Finance Act, 1994. Further, all
material provided by overseas clients are stored abroad in their servers
and the appellant is only given user id &password protected access for
working upon them and these are restored in their server and hence,
these cannot be transacted by the appellant as intangible goods. Hence,
he pleaded that taxation of such services is not feasible under the Finance
Act, 1994.
3.2 Learned Advocate also submitted that the Tribunal has held that
service tax is not leviable on such activity in a similar case of Prime Focus
Ltd., which was also upheld by the Hon'ble Supreme Court. He further
stated that the appellant had treated the services rendered to the
overseas clients on a bonafide belief as exports. The records of the
appellants were already audited during a Service Tax Audit conducted by
the Department for the period 01.04.2007 to 31.03.2001, and no
objection was raised in respect of the transactions at that time. However,
it is only during the second audit of their records, the objection regarding
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the issue of exports being treated as subjected to payment of service tax
under Rule 4(a) of POPS Rules was raised and SCN dated 18.04.2018 was
issued for recovery of service tax. This being an issue of interpretation
arising out of audit objection raised by the department, the question of
suppression of information, omission or commission of any action with an
intention to evade payment of service tax does not arise and it cannot be
a ground for imposition of penalty.
3.3 Learned Consultant relied upon the following judgments in support
of their stand: -
(i) Commissioner of Service Tax-IV, Mumbai Vs. Prime Focus Ltd. -
(2023)4Centax45(Tri. Mum.)affirmed by Hon'ble Supreme Court in
judgement dated 17.07.2023 in Civil Appeal Diary No. 23042 of
2023.
(ii) Principal Commissioner of Central Excise, Pune-I Vs. Advinus
Therapeutics Ltd. - 2017 (51) S.T.R. 298 (Tri. - Mumbai)
(iii)Dow Chemical International (P) Ltd. Vs. Commissioner of CGST,
Navi Mumbai - 2020 (33) G.S.T.L. 424 (Tri. - Mumbai)
(iv) CBIC Circular No. 209/1/2018-Service Tax dated 04.05.2018.
4. Learned Authorised Representative (AR) appearing for the
department, reiterated the findings made by the learned Commissioner
and stated that the adjudged demands are thus sustainable.
5. Heard both sides and perused the records of the case. We have also
perused the additional written submissions in the form of paper books
submitted in this case.
6.1 The issue involved in this appeal is to determine whether the services
provided by the appellants to their overseas clients is an export of services
or not, in terms of the Finance Act, 1994 and Rules framed thereunder;
and as a corollary to decide whether service tax is liable to be paid on
such services provided by the appellants to their overseas clients, in terms
of Place of Provision of Services Rules, 2012 (POPS). The services which
are in dispute are visual effects (VFX) services, which were earlier covered
under the specific category of taxable service viz. 'video tape production'
by 'video production agency' services.
6.2 It can be seen from the factual matrix of the case that the
appellants have rendered the services to both domestic film production
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and media houses located in India as well as to such clients located
abroad. It is not in dispute that in respect of the services provided to the
domestic clients, the appellants had duly discharged the service tax
liability. The dispute is limited in respect of the services provided to
overseas clients, which the Department had interpreted that it is not
export of service in terms of Rule 4(a) of POPS Rules, inasmuch as the
place of provision of service should be the location of performance of the
service.
6.3 In order to address the above issues, we would like to refer to the
legal provisions covering levy of service tax, export of services under the
Finance Act, 1994 and the rules framed thereunder viz. Place of Provision
of Services Rules, 2012, Service Tax Rules, 1994 as it existed during the
disputed period in respect of the taxable services under dispute.
Finance Act, 1994
"Definitions.
65. In this Chapter, unless the context otherwise requires,--
(119) "video production agency" means any professional videographer or any
commercial concern engaged in the business of rendering services
relating to video-tape production;
(120) "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;
(121) words and expressions used but not defined in this Chapter and defined
in the Central Excise Act, 1944 (1 of 1944) or the rules made
thereunder, shall apply, so far as may be, in relation to service tax as
they apply in relation to a duty of excise.
Post Negative List regime after 01.07.2012
"CHAPTER V
SERVICE TAX
Extent, commencement and application.
Section 64. (1) This Chapter extends to the whole of India except the State of
Jammu and Kashmir.
(2) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint.
(3) It shall apply to taxable services provided on or after the commencement
of this Chapter.
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Interpretations
Section 65B (44) service" means any activity carried out by a person for
another for consideration, and includes a declared service, but shall not
include--
(a) an activity which constitutes merely,--
(i) a transfer of title in goods or immovable property, by way of
sale, gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed
to be a sale within the meaning of clause (29A) of article 366 of
the Constitution; or
(iii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer in the
course of or in relation to his employment;
(c) fees taken in any Court or tribunal established under any law for
the time being in force.
Explanation 1.-- For the removal of doubts, it is hereby declared that nothing
contained in this clause shall apply to,--
(A) the functions performed by the Members of Parliament, Members of State
Legislative, Members of Panchayats, Members of Municipalities and Members of
other local authorities who receive any consideration in performing the functions
of that office as such member; or
(B) the duties performed by any person who holds any post in pursuance of the
provisions of the Constitution in that capacity; or
(C) the duties performed by any person as a Chairperson or a Member or a
Director in a body established by the Central Government or State Governments
or local authority and who is not deemed as an employee before the
commencement of this section.
Explanation 2.-- For the purposes of this clause, the expression "transaction in money
or actionable claim" shall not include--
(i) any activity relating to use of money or its conversion by cash or
by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate
consideration is charged;
(ii) any activity carried out, for a consideration, in relation to, or for
facilitation of, a transaction in money or actionable claim, including
the activity carried out--
(a) by a lottery distributor or selling agent on behalf of the
State Government, in relation to promotion, marketing,
organising, selling of lottery or facilitating in organising
lottery of any kind, in any other manner, in accordance
with the provisions of the Lotteries (Regulation) Act, 1998
(17 of 1998);
(b) by a foreman of chit fund for conducting or organising a
chit in any manner.]
Explanation 3.-- For the purposes of this Chapter,--
(a) an unincorporated association or a body of persons, as the case may
be, and a member thereof shall be treated as distinct persons;
(b) an establishment of a person in the taxable territory and any of his
other establishment in a non-taxable territory shall be treated as
establishments of distinct persons.
Explanation 4.-- A person carrying on a business through a branch or agency or
representational office in any territory shall be treated as having an establishment
in that territory;
Section 65B(52)"taxable territory" means the territory to which the
provisions of this Chapter apply;
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Charge of service tax on and after Finance Act, 2012.
Section 66B. There shall be levied a tax (hereinafter referred to as the
service tax) at the rate of 1 [fourteen per cent] on the value of all services,
other than those services specified in the negative list, provided or agreed to
be provided in the taxable territory by one person to another and collected in
such manner as may be prescribed.
Determination of place of provision of service.
Section 66C.
(1) The Central Government may, having regard to the nature and description
of various services, by rules made in this regard, determine the place where
such services are provided or deemed to have been provided or agreed to be
provided or deemed to have been agreed to be provided.
(2) Any rule made under sub-section (1) shall not be invalid merely on the
ground that either the service provider or the service receiver or both are
located at a place being outside the taxable territory.
Power to make rules.
Section 94.
(1) The Central Government may, by notification in the Official Gazette, make
rules for carrying out the provisions of this Chapter.
(2) In particular, and without prejudice to the generality of the foregoing
power, such rules may provide for all or any of the following matters, namely
:--
...
(hhh) the date for determination of rate of service tax and the place of provision of taxable service under section 66C."
Place of Provision of Services Rules, 2012 "Place of provision generally.
Rule 3 . The place of provision of a service shall be the location of the recipient of service:
Provided that in case 2 [of services other than online information and database access or retrieval services, where] the location of the service receiver is not available in the ordinary course of business, the place of provision shall be the location of the provider of service.
Place of provision of performance based services.
Rule 4. The place of provision of following services shall be the location where the services are actually performed, namely:--
(a) services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of service, in order to provide the service:
Provided that when such services are provided from a remote location by way of electronic means the place of provision shall be the location where goods are situated at the time of provision of service:1
Substituted for "twelve" by the Finance Act, 2015, w.e.f. 1-6-2015.2
Inserted by Notification No.46/2016-ST, dated 9-11-2016, w.e.f. 1-12-2016.8
ST/85927/2021 Provided further that this clause shall not apply in the case of a service provided in respect of goods that are temporarily imported into India for repairs and are exported after the repairs without being put to any use in the taxable territory, other than that which is required for such repair;
(b) services provided to an individual, represented either as the recipient of service or a person acting on behalf of the recipient, which require the physical presence of the receiver or the person acting on behalf of the receiver, with the provider for the provision of the service.
Place of provision of services relating to immovable property. Rule 5. The place of provision of services provided directly in relation to an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located.
Place of provision of services relating to events.
Rule 6. The place of provision of services provided by way of admission to, or organization of, a cultural, artistic, sporting, scientific, educational, or entertainment or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission, shall be the place where the event is actually held.
Place of provision of services provided at more than one location. Rule 7. Where any service referred to in rule 4, 5 or 6 is provided at more than one location, including a location in the taxable territory, its place of provision shall be the location in the taxable territory where the greatest proportion of the service is provided.
Place of provision of services where provider and recipient are located in taxable territory.
Rule 8. Place of provision of a service, where the location of the provider of service as well as that of the recipient of service is in the taxable territory, shall be the location of the recipient of service.
Place of provision of specified services.
Rule 9. The place of provision of following services shall be the location of the service provider:--
(a) Services provided by a banking company, or a financial institution, or a non-banking financial company, to account holders;
(c) Intermediary services;
(d) Service consisting of hiring of all means of transport other than,--
(i) aircrafts, and
(ii) vessels except yachts,
upto a period of one month".
Service Tax Rules, 1994
"Export of services.
Rule 6A. (1) The provision of any service provided or agreed to be provided shall be treated as export of service when,--
(a) the provider of service is located in the taxable territory,
(b) the recipient of service is located outside India,
(c) the service is not a service specified in section 66D of the Act, 9 ST/85927/2021
(d) the place of provision of the service is outside India,
(e) the payment for such service has been received by the provider of service in convertible foreign exchange, and
(f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act.
(2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification."
EXPORT OF SERVICES RULES, 2005 "Export without payment of service tax.
4. Any service, which is taxable under clause (105) of section 65 of the Act, may be exported without payment of service tax."
6.4 On careful reading of the definition of taxable service, as it existed prior to 01.07.2012, under Section 65(120) ibid read with Section 65(105) (zi) ibid, where the taxable services were enumerated under various category included under Section 65(120) and Section 65(105) ibid, the services of recording of any programme, event or function and included services relating to 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 were covered under the tax net as part of 'video-tape production' service provided by a video production agency to any other person in any manner. Further, post 01.07.2022, services were interpreted to refer any activity carried out by a person for another for consideration, including certain services which are a declared service, provided these services are not covered by certain exclusion provided therein under Section 65B(44) ibid . Hence, it is clear that the nature of services provided by the appellants in the present case, prior to 01.07.2012 were specifically covered under taxable category under Section 65(105) (zi) ibid and after 01.07.2012 generally under the scope of services as these are do not fall outside the scope of taxability of services under Section 66B ibid read with definition clause under Section 65B(44) ibid.
6.5 In order to further examine whether the services provided by the appellants to overseas clients is covered under the scope of export of services or not, we have examined the relevant provisions of the Finance Act, 1994 and Rules framed thereunder. For the period prior to 01.07.2012, 10 ST/85927/2021 it was specifically provided under Rule 4 of Export of Services Rules, 2005 that any taxable services could be exported without payment of service tax. During the period subsequent to 01.07.2012, the charging provision under Section66B ibid specifically provided that all services other than those in the negative list, when provided in the taxable territory is liable to be pay service tax. In other words, the provision of services that were covered under the net of service tax were those services provided within the territory of India except the State of Jammu and Kashmir. Thus, services provided to any person situated outside taxable territory, as a corollary, are not liable to be pay service tax. Thus, it is clear that when any services are provided outside the taxable territory and when such services fulfil the specified conditions provided Rule 6A of Service Tax Rules, 2005 to qualify as 'export' including the essential requirements that the recipient of service is located outside India, payment of service provided is received in convertible foreign exchange, this would be treated as export of services, and there is no levy of service tax thereon. In the present case, it is not disputed that the services were rendered to the clients situated abroad who are located outside India and the consideration were received in convertible foreign exchange as evidenced by purchase orders, invoices and Certificate of Foreign inward remittances provided by the City Union Bank Limited, International Banking Division, Chennai with which the appellants had held current account.
6.6 We had also examined the issue of what constitutes export from the context of Place of Provision of Services Rules, 2012 (POPS) framed in exercise of the powers under Section 66C ibid and Section 94(2)(hhh) ibid. It transpires from plain reading of the above legal provisions, that for the limited purpose of identifying the date for determination of rate of service tax and the place of provision in certain services in specified situations, these POPS Rules have been framed. The place of provision shall in general be the location of recipient of service, except in certain circumstances specified therein. These exceptions include performance based services, situations where services have been provided relating to immovable property, certain events such as celebration, conference, fair, exhibition etc., and certain specific services. In such cases, the place of provision of services is stated therein in the respective Rules. In the factual matrix of the present case, Rule 4 ibid is relevant as it provides for the situation where the services are actually performed on the goods that are physically made available to the service provider to work upon thereon; or the service 11 ST/85927/2021 provider is given remote access through electronic means to work upon the goods though these could be situated at the service recipient's premises/place. In terms of Rule 4 ibid, in respect of goods which are physically available with the service provider, the place of provision of service would be the place where services are actually performed and this would be the premises of the appellant, whereas in the case of goods, where access is provided through electronic means, then the place of provision of service would be the place where the goods are situated at the time of provision of service. In the present factual matrix of the case, the appellants have got access to the various film clippings upon which they work upon by accessing the specific requirement such as editing, cutting, colouring, dubbing, title printing, adding/modifying or deleting sound, imparting special effects etc. for the post-production of film shots, in order to make the movie/ film fit for release as per the requirements of the service receiver. As the appellants have got limited access through electronic means, duly restricted through user id & password, user access, and the goods remain with the service receiver situated abroad, the place of provision in this case is clearly proved to have been situated outside India.
7.1 We further find that the Central Board of Indirect Taxes and Customs (CBIC) had provided certain clarification in the matter of Place of Provision of Services Rules, 2012 vide Circular dated 04.05.2018, stating that in case where services on software involving testing, modification, customisation, adaptation, enhancement etc., then the place of provision of service is the location of recipient of such service. The relevant extract of the said CBIC Circular is extracted below:
"I am directed to draw your attention to the above subject and to explain the manner in which the place of provision has to be determined in case of development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software.
2. Software being intangible, does not have a unique existence and can exist on different servers at the same point in time. The version being customised, adapted, upgraded etc. will only be a copy of the original. Servers themselves are of different types, ranging from file servers (which make files available to workstations on a network), web servers (computer systems that host websites), remote servers (allow users to gain access to files and print services on the Local Area Network from a remote location), proxy servers (an intermediary server between a client application and another server), dedicated servers (single computer in a network reserved for serving the needs of the network) etc. There is also what is called "virtualisation of servers" which refers to the masking of server resources, including the number and identity of individual physical servers, processors and operating systems, from server users. The server administrator uses a software application to divide one physical server 12 ST/85927/2021 into multiple isolated virtual environments. The exact location of the server is neither always known to the service provider nor is its knowledge essential for providing the service. Limited access to the software for a limited period through electronic protocols is given to the service provider by the recipient of service to enable the former to provide the service. Only the recipient of service has control over who accesses the software, when it can be accessed, for how long and for what purpose.
3. Applying the definition of "declared services" in section 66E(d) of the Finance Act, 1994, and the provisions of POPS, to the specific cases of services of development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software, the conclusions which can be drawn are as follows :
3.1 in the case of services where data, instructions etc. are provided so as to develop software, i.e. development, design and programming of information technology software, the place of provision of service is the location of the recipient of the service.
3.2 in the case of services on software involving testing, debugging, modification etc. i.e. customisation, adaptation, upgradation, enhancement, implementation of information technology software, the place of provision of service is the location of the recipient of the service.
4. Therefore, in both the above cases, the place of provision of service is the location of the recipient of the service."
From the above clarification issue by CBIC, and the factual details of the present case, it is clear that in case of intangible goods such as software or files or certain film/movie clippings which are accessed through different servers by the service provider for a limited purpose of working upon them, through restricted control or access, it is clearly proved that the service providers in India are providing the services to the service recipients situated abroad and they do not physically handle any goods in India, i.e., within the taxable territory. Hence, the above clarification is in support of appellants stand that the services provided are export of services, the location of services being the at service recipient situated abroad.
7.2 Further, under the scheme of Negative List regime, the essence of indirect taxation is that a service should be taxed in the jurisdiction of its consumption. This principle is more or less universally applied. In terms of this principle, exports are not charged to tax, as the consumption is elsewhere, and services pay tax on their importation into the taxable territory.
8.1 We find that the dispute in respect of determining the location export of services in respect of services of imparting special effects, digital 13 ST/85927/2021 restoration services etc. is no more open to debate, as the Tribunal has held the same as export of services and not chargeable to service tax in the case of Prime Focus Ltd. (supra). The relevant paragraphs of order of the Tribunal in the said case of Commissioner of Service Tax-IV, Mumbai Vs. Prime Focus Ltd. - 2023 (4) Centax45 (Tri. -Bom.) is extracted and given below:
"18. Learned Authorized Representative also placed reliance on the decision of the Tribunal in Crompton Greaves Ltd. v. Commissioner of Central Excise, Aurangabad 2016 (42) S.T.R. 306 (Trib. - Mum.) [2015- TIOL-2724-CESTAT-Mum] and in Roha Dyechem (P.) Ltd. v. Commissioner of Central Excise, Raigad [2017-TIOL-3448 CESTAT- Mum./2016 (42) S.T.R. 306 (Tri. - Mumbai)].
19. Learned Chartered Accountant submitted that rule 4 of Place of Provision of Services 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 (Trib.
- Delhi)] and in C3i Consultants India (P.) 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 Services 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 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) S.T.R. 625/2008 taxmann.com 1072 (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 Services 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 Services 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 14 ST/85927/2021 the Constitution, is restricted to physical goods and, in determining the scope of escapement, held so in specific context. That does not 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, 1994. 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 of, the impugned order is sustained to the extent of determination that the respondent herein has exported services in accordance with Export of Services Rules, 2005 and Rule 6A of Service Tax Rules, 1994 for the relevant periods."
8.2 We further find that in the Civil Appeal Diary No.23042/2023 filed by the department against the aforesaid order of the Tribunal which held that the services have been exported in terms of Export of Services Rules, 2005 and Service Tax Rules, 1994, the Hon'ble Supreme Court by its judgement dated 18.07.2023 had dismissed the appeal filed by the department, by upholding the order of the Tribunal.
9. In view of the foregoing discussion and analysis, we are of the considered view that services provided by the appellants in the present set of facts is export of services in terms of Sections 66B, 66C of the Finance Act, 1994 read with Rule 6A of Service Tax Rules, 1994 and the first proviso to Rule 4 of the Place of Provision of Services Rules, 2002. Therefore, the impugned order is liable to be set aside to the extent it had confirmed the adjudged demands proposed in the SCN. Accordingly, by setting aside the impugned order dated 27.02.2021, the appeal is allowed in favour of the appellants.
10. In the result, the appeal is allowed in favour of the appellants.
(Order pronounced in open court on 06.06.2024) (S.K. Mohanty) Member (Judicial) (M.M. Parthiban) Member (Technical) Sinha