Custom, Excise & Service Tax Tribunal
M/S. Em Jay Engineers vs Commissioner Of Central Excise, Mumbai on 6 May, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI APPEAL NO.ST/108/09 (Arising out of Order-in-Appeal No. KKS(27)27/STC/2009 dated 30.3.2009 passed by the Commissioner (Appeals) Central Excise, Mumbai-Zone-I For approval and signature: Honble Shri Ashok Jindal, 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 : Yes
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
=============================================================
M/s. Em Jay Engineers
:
Appellants
VS
Commissioner of Central Excise, Mumbai.
Respondents
Appearance
Shri S.K. Babaladi, Consultant, for Appellants
Shri Manish Mohan, Authorized Representative
CORAM:
Shri Ashok Jindal, Member (Judicial)
Date of hearing : 06/05/2010
Date of decision : 26/05/2010
ORDER NO.
Per : Ashok Jindal, Member (Judicial)
This appeal is filed by the appellant against the rejection of their refund claim of Rs.1,40,628/- on the ground that they have not filed the refund claim within time and Rs. 1,74,809/- is not admissible as per Notification No. 2/2007-ST dated 1.3.2007.
2. The brief facts of the case are that the appellant filed a refund claim of Rs.6,71,439/- for the period October 2005 to June 2007 on the ground that they are not liable to pay service tax as the appellant was appointed by foreign company for promoting their sales in India and appellants are getting commission from the foreign principal in foreign currency and their activities are considered as export services and the same are exempted form payment of service tax. However, they paid service tax under protest. The issue was settled and appellants activities had been considered as export of service and exempted from payment of service tax. After scrutiny of the claim, a show cause notice was issued to them as to why the refund claim should not be rejected due to various discrepancies noticed by the department. The adjudicating authority sanctioned the refund claim of Rs.3,56,002/- and rejected an amount of Rs. 1,40,268/- on the ground that the claim has not filed within time and Rs.1,74,809/- is not admissible as pre Notification No. 2/2007-ST dated 1.3.2007. The appeal was rejected by the Commissioner (Appeals), aggrieved from the same the appellant is before me.
3. The learned Advocate appearing on behalf of the appellant submits that in this case the appellant has provided the service of introducing the Indian client to their foreign principal M/s. Ital Vacccum, S.R.L., Itlay, who does not have any office in India, as a commission agent for promoting their sales in India for which they are getting commission from their foreign principal in foreign currency as export of services which are exempted and not liable to pay any service tax. He further contended that the appellant has provided the services of sale promotion to their foreign principle, who used this service outside India and paid the commission in foreign currency. Hence, as per the relevant provisions of service tax laws, the appellants are not liable to pay service tax although they have paid the service tax under protest. Hence, when the service tax has been collected by the department without any authority, the appellant is entitled to claim refund of the service tax deposited by them with the department. He submitted that the rejection of refund claim on the ground of limitation is without any authority of law. He further submitted that merely saying that the provisions of Section 11B of the Central Excise Act, 1944 are applicable to the service tax refund is not a speaking order. The order does not speak why the provisions of Section 11B of the Central Excise Act, 1944 are applicable to this case and mere saying that the refund claim is not admissible as per Notification No. 2/2007 is also not correct. He further submitted that in the case of KSH International Pvt. Ltd. Vs. Commissioner of Central Excise, Belapur reported in 2010-VIL-05-CESTAT-MUM on the identical facts. This Tribunal has allowed the appeal against the rejection of refund claim. He also submitted that the amount has been collected by the Revenue erroneously and the same is to be refunded. To support this contention he relied on Hexacom (I) Ltd. Vs. Commissioner of Central Excise, Jaipur reported in 2003 (156) E.L.T. 357 (Tri.Del.) wherein it was held that if any amounts are collected erroneously as representing service tax, which is not in force, there is no bar to return such amounts. He also submitted that in the case of Commissioner of Central Excise Vs. Jai Laxmi Finance Co. reported in 2006 (3) S.T.R. 25 (Tri.-Del.) the same view was taken by the Tribunal. Hence, their refund claim be allowed and impugned order be set aside.
4. On the other hand, the learned SDR appearing on behalf of the Revenue submitted that in this case the appellant is provided their service in India and same are being used in India, hence the appellant is liable to pay service tax. In support of his contention he placed reliance on All India Fedn of Tax Practitioners Vs. Union of India reported in 2007 (7) S.T.R. 625 (S.C.) wherein the Honble Apex Court has observed as under:-
place of performance of service is decisive for determining event of taxability as well as incidence of tax. The appellant appears to have performed service in India for ultimate consumption thereof in India by its clinets/customers in India. The service is destined to exhaust in India and extinct soon after performance thereof. Post performance liability only remains to be discharged by foreign principal through the appellant in India. Thus, the beneficiaries of services were located in India for ultimate consumption of the service provided in India.
He further submitted that in the case of Microsoft Corpn. India Pvt. Ltd. Vs. Commissioner of Service Tax reported in 2009 (10) LCX0007 the Honble High Court of Delhi while deciding the stay application has held that Indian Consumers pay for services which go out to owners, namely, Holding Company and part of it comes back to India in shape of commission. Economic and commercial activities also take place in India, hence stay was rejected. He further submitted that in view of the above decisions the service provided by the appellant is to their foreign principal is used in India. Hence, the refund claim is not acceptable.
5. Heard both sides.
6. On careful consideration of the submissions made by both the sides. I find that in this case, the appellant had procured purchased order in India for the suppliers of goods located out side India i.e. Italy and transmitted the same by courier or electronic means to the suppliers. Acting upon those purchase orders, the suppliers exported the goods to the buyers in India and directly collected payments from the buyers. After receipt of the payment from the buyers, the suppliers paid commission to the appellant in convertible foreign exchange. The appellant paid service tax on these commissions under protest. Subsequently, the appellant claimed rebate of service tax under Rule 5 of the Export Service 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 fulfillment of such procedures as may be specified in the said notification. The relevant notification prescribed mainly two conditions (a) the service is delivered outside India and used in business outside India. (b) payment of such service is received by the service provider in convertible foreign exchange. The claim of rebate of service tax paid on taxable service exported by the service provider had to be considered in the light of the said conditions. Rule 3 of the Export Service Rules, 2005 was amended w.e.f. 19.4.2006 and accordingly w.e.f. 19.4.2006, 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 provisions of any taxable service shall be treated as export of service when the following conditions are satisfied.
a) such service is delivered outside India and used outside India; and
b) payment of such service provided outside India is received by the service provider in convertible foreign exchange.
7. These facts are not in dispute. The rejection of refund claim was only on the ground that the service provided to their foreign supplier has been delivered outside India but used in India. The period involved is April 2005 to June 2007. As this Tribunal has held in the case of KSH International Pvt. Ltd. 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. 11/5/2009-ST dated 24.2.2009. The Board, in respect of business auxiliary services falling under Rule 3(1) (ii) of the Export 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 Rule 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 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. Accordingly, I find that the facts of this case are identical to the case of KSH International Pvt. Ltd. The reliance placed by the learned DR are not applicable to this case as in those cases the services has been performed in India and they were consumed in India. In this case the service of procuring the purchase orders for the foreign supplier, who is outside India and those procurement of purchase orders of good were used by the foreign supplier outside India and acted upon them supplied the goods from outside India. Hence, the reliance placed by the learned DR is not relevant to the facts of this case. The reliance in the case of Microsoft Corpn. (I) Pvt. Ltd. is also not relevant as there was a prima facie view of the Honble High Court which is not the final view. The case of KSH International Pvt. (supra) is squarely applicable to the facts of this case. Following the ratio in the case of KSH International Pvt. Ltd., I set aside the impugned order and allow the appeal filed by the appellant with consequential relief.
(Pronounced in court on 26/05/2010) (Ashok Jindal) Member (Judicial) Sm 7