Custom, Excise & Service Tax Tribunal
M/S Vodafone Essar Gujarat Limited vs Commissioner Of Service Tax, Ahmedabad on 22 June, 2015
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad Appeal No.ST/528,529,661-663,732,733/2011 [Arising out of OIA-124-2011-STC-KANPAZHAKAN-COMMR-A-AHD, dt.25.05.2011; OIA-128-2011-STC-KANPAZHAKAN-COMMR-A-AHD, dt.26.05.2011; OIA-202-2011-STC-KANPAZHAKAN-COMMR-A-AHD, dt.01.08.2011; OIA-206-2011-STC-KANPAZHAKAN-COMMR-A-AHD, dt.02.08.2011; OIA-203-2011-STC-KANPAZHAKAN-COMMR-A-AHD, dt.01.08.2011; OIA-227-2011-STC-KANPAZHAKAN-COMMR-A-AHD, dt.26.08.2011; OIA-226-2011-STC-KANPAZHAKAN-COMMR-A-AHD, dt.26.08.2011, passed by Commissioner of Central Excise & Service Tax, Ahmedabad] M/s Vodafone Essar Gujarat Limited, M/s Vodafone West Limited Appellants Vs Commissioner of Service Tax, Ahmedabad Respondent
Represented by:
For Appellant: Shri P. Paranjape, Advocate For Respondent: Dr. J. Nagori, Authorised Representative For approval and signature:
Honble Mr. P.K. Das, Member (Judicial) Honble Mr. P.M. Saleem, Member (Technical)
1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen the order?
4. Whether order is to be circulated to the Departmental Yes authorities?
CORAM:
HONBLE MR. P.K. DAS, MEMBER (JUDICIAL) HONBLE MR. P.M. SALEEM, MEMBER (TECHNICAL) Date of Hearing/Decision:22.06.2015 Order No.A/10835-10841/2015, dt.22.06.2015 Per: P.K. Das A common issue involves in these appeals and therefore, all are taken up together for disposal.
2. The relevant facts of the case, in brief, are that the Appellants are engaged in the business of providing Telecommunication service and registered with Service Tax authorities for payment of Service Tax. The Appellants filed rebate claims under Rule 5 of Export Service Rules, 2005 in respect of Service Tax paid by them. The Appellants raised the Bills to their customers/clients of Foreign Telecom Operator (FTO) for service to inland customers who visited to India and received amount from FTO in respect of such bills in foreign currency. According to the Revenue, the Appellants rendered the Telecommunication services to the inland customers of FTO in India and therefore, such service cannot be treated as export of service. In all these appeals, the Adjudicating authority rejected the rebate claims. By the impugned order, the Commissioner (Appeals) upheld the Adjudication order.
3. The learned Advocate contested the denial of rebate claim on merit as well as on limitation. He submits that the Tribunal in the Appellants own case Vodafone Essar Cellular Ltd Vs CCE Pune-II 2013 (31) STR 738 (Tri-Mumbai) held in favour of the Appellant. Subsequently, in the case of Vodafone Cellular Ltd Vs CCE Pune-III 2014 (34) STR 890 (Tri-Mum), the Tribunal, following the earlier decision, allowed the rebate claim on merit, but it has held against the Appellant on limitation. He relied upon the following decisions:-
a) Vodafone Essar Cellular Ltd Vs CCE, Pune-III 2013 (31) STR 738 (Tri-Mum)
b) Vodafone Cellular Ltd Vs CCE, Pune-III 2014 (34) STR 890 (Tri-Mum)
c) CST Mumbai-I Vs Vodafone India Ltd 2014-TIOL-1794-CESTAT-MUM
d) GAP International Sourcing (I) Pvt.Ltd. Vs CST 2014-TIOL-465-CESTAT-DEL
e) Alpine Modular Interiors Pvt.Ltd. Vs CST (Adj.) New Delhi 2014-TIOL-517-CESTAT-DEL
f) Microsoft Corporation (I) Pvt.Ltd. Vs CST New Delhi 2014-TIOL-1964-CESTAT-DEL
g) Glyph International Ltd Vs UoI in WP(C)6224/2013, dt.20.03.2014.
h) Global Energy Food Industries Vs CCE Ahmedabad 2010 (262) ELT 627 (Tri-Ahmd)
4. He submits that the Notification No.11/2005-ST, dt.19.04.2005 does not indicate any limitation and therefore, no limitation would be applicable in respect of the rebate claims. He relied on the decision of the Honble Gujarat High Court in the case of CCE Vs Swagat Synthetics 2008 (232) ELT 413 (Guj). The learned Advocate filed a compilation of case laws and the relevant rules and circulars.
5. The learned Authorised Representative on behalf of the Revenue submits that the Tribunal while passing the decision in the case of Vodafone Cellular Ltd (supra) had not considered various decisions of the Honble Supreme Court, the definition of Telecommunication service and the circulars of Board. He submits that the Honble Supreme Court in the case of All India Federation of Tax Practitioners Vs Union of India 2007 (7) STR 625 (SC) had held that the Service Tax is a VAT which in turn is destination based consumption tax. The Honble Supreme Court has laid down the law on the subject of nature or location of any service, the criteria for taxing event of service tax. It is an essential activity while determining the nature of location. In the present case, the taxing event is in India, as the Appellant rendered the service directly to the International Inbound Roamer (IIR) and when the IIR leaves in India, the service is concluded. He categorically submits that in the present case, there is no need for devising any test, since it is not in dispute that the activity which comprises the taxable event both performed and consumed in India. He drew the attention of the Bench to the relevant portion of the Export Service Rules. Thus, the second condition of the definition of Export of service Rule, used outside India is not satisfied and thus, it cannot be treated as export of service. He referred the Board circular No.90/1/2007-ST,dt.03.01.2007. He also referred the decision of the Tribunal in the case of Life Care Medical Systems Vs CST Mumbai-II 2013 (29) STR 129 (Tri-Mum). The reliance on the international standards, which follows the General Agreement on Trade and Tariff (GATT). The GATT formulation may have persuasive value and they do not form part of interpretative criterion. It is submitted that the Tribunal while deciding the case of Vodafone Essar Cellular Ltd (supra), heavily relied upon the decision of the Tribunal in the case of Paul Ltd Merchants Ltd Vs CCE Chandigarh 2012-TIOL-1877-CESTAT-Del. The decision of the Tribunal in the case of Paul Merchant Ltd (supra) would not be applicable in the present case. It is submitted that the Tribunal has not dealt with the aspect of consumption of service. In the case of Paul Merchant Ltd (supra), a person situated abroad approaches Western Union for transfer of money to someone in India. In the present case, the person who is the service recipient of the Appellant is in India and therefore, there is a basic difference in the present case and Paul Merchant Ltd (supra). In the present case, the IIR was paying charges to the Appellant through the FTO. It is a case of payment of money to the Appellant through the FTO, cannot change the character of the service of the Appellant to the IIR directly. In the case of Paul Merchant Ltd (supra), there was a principle to principle that present relationship existed between Western Union and Paul Merchant Ltd and Paul Merchant Ltd was, inter alia, providing the service of delivering the money and also undertaking promotion and marketing of the money. In the case Paul Merchant Ltd (supra), which weighted the Bench that the person paying money was located abroad and the recipient of money was not paying the money to anybody. He also submits that the decision of the Tribunal in the case of Vodafone Essar Cellular Ltd (supra) is not applicable for the reason, in the present case, the service provider is bound by the provisions of Indian Telegraph Act, 1885 and it cannot provide service to FTO as the FTO is situated in foreign land and the Indian Telecom Operator is not licenced to render service to FTO under the Indian Telegraph Act, 1885.. In the case of Vodafone Essar Cellular Ltd (supra), the Tribunal heavily relied upon the Circular No.111/05/2009/ST, dt.24.02.2009. He submits that the Board circular had clarified in different perspective, the benefit accrued outside India and then it will be treated as export. He relied upon the subsequent circular of the Board No.141/10/2011-TRU, dt.11.05.2011 that clarifies the situation. He submits that the Tribunal in the case of Vodafone Cellular Ltd 2014 (34) STR 890 had categorically given the finding that the rebate claim is partly barred by limitation and have also followed various decisions. He relies on the following decisions:-
a) Everest Flavours Ltd Vs UoI 2012 (282) ELT 481 (Bom.)
b) CCE Vs GTN Engineering 2012-TIOL-369-HC-MAD-CX
c) CCE Chennai Vs Celebrity Designs India Pvt.Ltd 2015-TIOL-646-HC-MAD-CX
6. After hearing both the sides and on perusal of the records, we find that the Adjudicating authority rejected the rebate claim on merit as well as partly barred by limitation. There is no dispute on the facts of the case that the Appellants raised to Bills to FTO as per agreement for rendering telecommunication service to the International Inbound Roamer registered with FTO. The learned Authorised Representative for the Revenue had fairly submitted that the facts in the appellants own case is Vodafone Essar Cellular Ltd (supra) and the present appeal are similar. He attempted to distinguish the case of Vodafone Essar Cellular Ltd (supra) on the legal aspects. For the purpose of proper appreciation of the decision of the Tribunal in the case of Vodafone Essar Cellular Ltd (supra) 2013 (31) STR 738, we reproduce below the relevant portion of the said decision:-
5.1?We have perused the agreement entered into between the appellant and the foreign telecom service providers. As per the said agreement, the appellant has agreed to provide telecom services to the customer of the foreign telecom service provider while he is in India using the appellants telecom net work. The consideration for the service rendered is paid by the foreign service provider. There is no contract/agreement between the appellant and the subscriber of the foreign telecom service provider to provide any service. Since the contract for supply of service is between the appellant and foreign telecom service provider who pays for the services rendered, it is the foreign telecom service provider who is the recipient of the service. From the provisions of law relating to GST in UK and Australia, relied upon by the appellant, this position becomes very clear. Your customers customer is not your customer. When a service is rendered to a third party at the behest of your customer, the service recipient is your customer and not the third party. For example, when a florist delivers a bouquet on your request to your friend for which you make the payment, as far as the florist is concerned you are the customer and not your friend.
5.2?Export of Service Rules, 2005 defines export in respect of taxable services. For this purpose, the services have been categorized into 3. Category I deals with specified services provided in relation to an immovable property situated in India. Category II deals with specified taxable services where such taxable service is partly performed outside India and states that when it is partly performed outside India, it shall be treated as performed outside India. Category III deals with services not covered under category I and II. The telecom services fall under category III. As far as category III services are concerned, the transaction shall be construed as export when provided in relation to business or commerce to a recipient located outside India and when provided otherwise to a recipient located outside India at the time of provision of such service. The additional conditions required to be satisfied are such services as are provided from India and used outside India; and consideration for the service rendered is received in convertible foreign exchange. As observed earlier, the service is rendered to a foreign telecom service provider who is located outside India and therefore, the transaction constitutes export and we hold accordingly.
5.3?The Boards clarification vide Circular No. 111/5/2009-S.T., dated 24-2-2009 makes this position very clear. Para 3 of the Circular which is relevant is reproduced verbatim below:-
3.?It is an accepted legal principle that the law has to be read harmoniously so as to avoid contradictions within a legislation. Keeping this principle in view, the meaning of the term used outside India has to be understood in the context of the characteristics of a particular category of service as mentioned in sub-rule (1) of rule 3. For example, under Architect service (a category I service [Rule 3(1)(i)]), even if an Indian architect prepares a design sitting in India for a property located in U.K. and hands it over to the owner of such property having his business and residence in India, it would have to be presumed that service has been used outside India. Similarly, if an Indian event manager (a category II service [Rule 3(1)(ii)]) arranges a seminar for an Indian company in U.K., the service has to be treated have been used outside India because the place of performance is U.K. even though the benefit of such a seminar may flow back to the employee serving the company in India. For the services that fall under Category III [Rule 3(1)(iii)], the relevant factor is the location of the service provider and not the place of performance. In this context, the phrase used outside India is to be interpreted to mean that the benefit of the service accrues outside India. Thus for category III services, 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 .* Thus what emerges from the above circular is that when the appellant rendered the telecom service in the context of international roaming, the benefit accrued to the foreign telecom service provider who is located outside India since the foreign telecom service provider could bill his subscriber for the services rendered. This is the practice followed in India also. When an Indian subscriber to, say, MTNL/BSNL goes abroad and uses the roaming facility, it is the MTNL/BSNL who charges the subscriber for the telecom services including service tax, even though the service is rendered abroad by the foreign telecom service provider as per the agreement with MTNL/BSNL.
5.4?The Paul Merchants case (supra) relied upon by the appellant dealt with an identical case. The question before the Tribunal in that case was when Agents/Sub-agents in India of Western Union Financial Services, Panama, makes payments to an Indian beneficiary on behalf of the customer of Western Union in foreign country, whether the services rendered by the Indian Agents/Sub-agents should be treated as export or not under Export of Service Rules, 2005. By a majority decision, it was held that the service being provided by the agents and sub-agents is delivery of money to the intended beneficiaries of the customers of Western Union abroad and this service is business auxiliary service, being provided to Western Union. It is the Western Union who is the recipient and consumer of this service provided by their Agents and sub-agents, not the persons receiving money in India. The ratio of the said decision applies squarely to the facts of the present case before us. Once the ratio is applied, it can be easily seen that the service recipient is the foreign telecom service provider and not the subscriber of the foreign telecom service provider who is roaming in India.
7. The Tribunal relied upon the decision of the Tribunal in the case of Paul Merchant Ltd (supra). The main contention of the learned Authorised Representative that the Tribunal had not considered the decision of Honble Supreme Court in the case of All India Federation of Tax Practitioners (supra). He heavily relied upon the principle of equivalence as referred by the Apex Court in the case of All India Federation of Tax Practitioners (supra). It is also argued that the Honble Supreme Court observed that it is a destination based consumption tax. The Tribunal in the case of Vodafone Essar Cellular Ltd 2013 (31) STR 738 (supra), followed the decision in the case of Paul Merchant Ltd (supra). In that case (i.e. Paul Merchant Ltd), there was a difference of opinion between the two Members and the 3rd Member had decided in favour of the Assessee. It is seen from the order of the minority view that the decision of Honble Supreme Court in the case of All India Federation of Tax Practititioners (supra), had discussed in detail in respect of principle of equivalence and the destination based consumption tax. In that case, the learned 3rd Member had observed as under:-
(ii) The principle of equivalence between the taxation of goods and taxation of service had been laid down by the Apex Court in the case of Association of Leasing & Financial Service Companies v. Union of India (supra) and All India Federation of Tax Practitioners v. Union of India (supra) in the context of constitutional validity of levy of Service Tax on certain services. This principle does not imply that Service Tax should be levied and collected in exactly the same manner as the levy and collection of tax on goods or that export of service should be understood in exactly the same manner in which the export of goods is understood. In fact the question as to what constitutes the export or import of service was neither raised nor discussed in the above-mentioned judgments of the Apex Court. As discussed in this order, the Export of Services Rules, 2005 are in accordance with the Apex Courts ruling in the above-mentioned judgments that Service Tax is a value added tax, which in turn is a destination based consumption tax in the sense that it is levied on commercial activities, and it is not a charge on the business but a charge on the consumers. There is nothing in Export of Services Rules, 2005 which can be said to be contrary to the principle that a service not consumed in India is not be taxed in India.
(iii) What constitutes export of service is to be determined strictly with reference to the provisions of Export of Services Rules, 2005. Not doing so and leaving this question to be determined by individual tax payers or tax collectors for each service, based on their deductive ability would result only in total confusion and chaos.
8. The Revenue challenged this decision of Paul Merchant Ltd (supra) before the Honble Punjab & Haryana High Court, which is still pending. The submission of the learned Authorised Representative that the Tribunal had not considered the decision of the Honble Supreme Court in the case of All India Federation of Tax Practitioners (supra), is not correct. We do not find any force in the submission of the learned Authorised Representative that the illustration made by the Tribunal in the case of Vodafone Essar Cellular Ltd (supra) would not be appropriate. In any event, the judgment cannot be distinguished merely on the basis of illustration. We find that in the Appellants own case Vodafone Essar Cellular Ltd, had discussed all the issues in detail and we agree with the same on merit.
9. Regarding the rejection of the rebate claim as time barred, the Tribunal in the case of Vodafone Cellular Ltd Vs CCE Pune-III 2014 (34) STR 890 held as under:-
5.3?However, as regards the time-bar issue, the contention of the Revenue has merits. We notice that the provisions of Section 11B of the Central Excise Act, 1944, which deals with refund of excise duties has been made applicable to Service Tax vide Section 83 of the Finance Act, 1994. This would imply that the time-limit of one year from the date of payment of tax for filing of the refund claim would apply in respect of Service Tax refunds also. Even if it is argued that there is no specific time-limit set out in Notification 11/2005-S.T., it is a settled position in law that though the law is silent on the time-limit applicable, a reasonable time-limit has to be read into the law. The decision of the Honble Apex Court in the case of Citadel Fine Pharmaceuticals and the Honble Bombay High Court in the case of Everest Flavours Ltd. and other decisions of the Honble Apex Court relied upon by the Revenue would support this contention. Therefore, seven refund claims covered by the Order-in-Appeal dated 24-6-2011 appears to attract time-bar and only two claims covered by Order-in-Appeal dt.24.10.2011 and 17.4.2012 is not hit by the time-bar aspect. However, the lower adjudicating authority is directed to verify the date of payment of Service Tax in respect of seven refund claims pertaining to the period April, 2007 to April, 2009 and verify whether the refund claims have been filed beyond the period of one year from the date of payment of Service Tax and if so, the appellant would not be entitled for any refund at all. Thus, in respect of the seven claims pertaining to the period April, 2007 and April, 2009, the matter is remanded back to the adjudicating authority for the limited purpose of verification as to whether the claims are time-barred or not. As regards the balance two claims, the appellant is entitled for the same as time-bar issue is not attracted in these cases and the unjust enrichment principles also would not apply as the services rendered would amount to export of services.
10. The main thrust of the argument of the learned Advocate is that there is no limitation mentioned in the notification, and therefore, the limitation would not be applied for filing the rebate claim. The Tribunal after following various decisions of High Court, held that where the statute provides the period of limitation under Section 11B of the Act, 1944 for a claim for rebate, the provisions has to be complied with as a mandatory requirement of law. In view of that, we find that the decision of the Tribunal in the case of Vodafone Cellular Ltd (supra) applicable in the present case.
11. In view of the above discussion and following the decision of the Tribunal in the Appellants own case, we allow all the appeal and the matter is remanded to the Adjudicating authority for verification as to whether the claims are time barred or not. We make it clear that the principle of unjust enrichment would not apply as held by the Tribunal in the Appellants own case Vodafone Cellular Ltd.
(Dictated & Pronounced in Court)
(P.M. Saleem) (P.K. Das)
Member (Technical) Member (Judicial)
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