Custom, Excise & Service Tax Tribunal
Ksh International Pvt. Ltd vs Commissioner Of Central Excise, ... on 14 January, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. ST/84/09 (Arising out of Order-in-Appeal No. AH/149/Bel/2009 dated 30.3.2009 passed by Commissioner of Central Excise (Appeals), Mumbai-II) For approval and signature: Hon'ble Mr. P.G. Chacko, Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== KSH International Pvt. Ltd. Appellant Vs. Commissioner of Central Excise, Belapur Respondent Appearance: Shri Vinay S. Sejpal, Advocate, for appellant Shri N.A. Sayyad, Authorised Representative (JDR), for respondent CORAM: Hon'ble Mr. P.G. Chacko, Member (Judicial) Date of Hearing: 14.1.2010 Date of Decision: 14.1.2010 ORDER NO.................................
This appeal filed by the assessee is against rejection of certain claims for rebate of service tax which was paid by the appellant as commission agent. The appellant had procured purchase orders in India for suppliers of goods located abroad and transmitted the same by courier or electronic means to the said suppliers. Acting upon those purchase orders, the suppliers exported the goods to the buyers in India and directly collected payments from them. Upon receipt of price of the goods, the suppliers paid commission to the appellant in convertible foreign exchange. Service tax was paid on these payments under Section 65(105)(zzb) of the Finance Act, 1994. Subsequently, the appellant claimed rebate of the service tax under Rule 5 of the Export of Services Rules, 2005. Rule 5 ibid allowed rebate of service tax paid on a taxable service which was exported subject to such conditions/limitations and to fulfilment of such procedure as may be specified in the notification. The relevant notification prescribed mainly two conditions, viz. (a) the service is delivered outside India and used in business outside India, (b) payment for such service is received by the service provider in convertible foreign exchange. Thus, a claim for rebate of service tax paid on a taxable service exported by the service provider had to be considered in the light of the said conditions. Rule 3 of the Export Services Rules, 2005 was amended w.e.f. 19.4.2006 and accordingly, w.e.f. that date, business auxiliary services falling under Section 65(105)(zzb) of the Finance Act, 1994 would be considered to have been exported when provided in relation to business or commerce, to a recipient located outside India. Sub-rule (2) further laid down that the provision of any taxable service shall be treated as export of service when the following conditions are satisfied, namely:-
(a) such service is delivered outside India and used outside India; and
(b) payment for such service provided outside India is received by the service provider in convertible foreign exchange.
2. The lower authorities acknowledged the fact that the appellant received commission from the foreign suppliers of goods in convertible foreign exchange. They, however, refused to accept the contention of the appellant that the service provided by them to the foreign suppliers had been delivered outside India and used outside India. In the result, the claim for rebate of service tax was rejected. Refund of service tax to the extent of Rs.8,02,364/- stands denied to the appellant for the period from 19.4.2006 to 31.12.2006.
3. After hearing both sides, I find that the above denial of refund of service tax to the appellant under Rule 5 ibid is contrary to the express provisions of law as clarified in CBEC circular No. 111/5/2009-ST dated 24.2.2009. The Board, in respect of business auxiliary services falling under Rule 3(1)(iii) of the Export of Services Rules, 2005, clarified thus: "The phrase 'used outside India' is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India. What is accrued outside India is the benefit in terms of promotion of a business of a foreign company." This circular is in conformity with the provisions of Rules 3 and 5 of the Export of Services Rules, 2005. The service rendered by the appellant was admittedly one of the business auxiliary services classified under Section 65(105)(zzb) of the Act. The features of this service are also eloquently discernible from the records. As a commission agent, the appellant canvassed purchase orders from prospective Indian buyers for the goods supplied by the foreign companies. These purchase orders were transmitted to the foreign companies either by courier or by electronic means. The foreign companies acted upon these purchase orders and accordingly supplied the goods directly to the Indian buyers, who made the payments directly to the foreign suppliers. Upon receipt of these payments, commission was paid to the appellant by the foreign companies, in convertible foreign exchange. It is not in dispute that the requirement of the commission having to be paid in convertible foreign exchange was fulfilled by the appellant. What is in dispute is whether the business auxiliary service was delivered outside India and used outside India. The rendering of the service was complete only when the purchase orders canvassed by the appellant in India were received by the foreign companies. These purchase orders were, admittedly, received abroad. They were also, admittedly, acted upon by the foreign companies abroad. In other words, the benefit of the service provided by the appellant accrued to the foreign companies outside India. The condition in question stood fulfilled by the appellant. The contrary view taken by the lower authorities cannot be sustained. A line of decisions cited by the learned counsel squarely supports the case of the appellant. These are Blue Star Ltd. vs. CCE, Bangalore 2008 (11) STR 23 (Tri.-Bang.), ABS India Ltd. vs. CST, Bangalore 2009 (13) STR 65 (Tri.-Bang.) and CST, Ahmedabad vs. B.A. Research India Ltd. 2009-TIOL-1981-CESTAT-AHM. The facts of the case of Blue Star Ltd. are similar to those of the instant case. It was held in that case that the appellant was entitled to refund under Rule 5 on the service tax paid by them in respect of export of business auxiliary service. In the case of ABS India Ltd. also, it was held that exemption was admissible to the assessee in respect of business auxiliary service exported by them. The Tribunal found that the benefit of such export was derived by the recipient located outside India and was utilised outside India. The decision of this Tribunal in the case of B.A. Research India Ltd. is also to the same effect.
4. In the result, the impugned order is set aside to the extent challenged in this appeal. The appeal is allowed.
(Pronounced in Court) (P.G. Chacko) Member (Judicial) tvu 1 6