Custom, Excise & Service Tax Tribunal
Vodafone West Limited vs Service Tax - Ahmedabad on 29 October, 2019
Customs, Excise & Service Tax Appellate Tribunal,
West Zonal Bench : Ahmedabad
REGIONAL BENCH - COURT NO. 3
Service Tax Appeal No. 11447 of 2015
[Arising out of Order-in-Appeal No OIA-148/2013-STC-/SKS/COMMR-A-/AHD dated
17.07.2013 passed by Commissioner (Appeal) of Central Excise & ST, Ahmedabad]
Vodafone West Limited .... Appellant
Vodafone House, Building A, Corporate Road, Prahlad
Nagar, AHMEDABAD, GUJARAT-380051.
VERSUS
Commissioner of Central Excise & ST, Ahmedabad .... Respondent
7 Th Floor, Central Excise Bhawan, Nr. Polytechnic Central Excise Bhavan, Ambawadi, Ahmedabad, Gujarat-
WITH
(i) Service Tax Appeal No. 11448 of 2015 ( Vodafone West Limited)
(ii) Service Tax Appeal No. 11459 of 2015 ( Vodafone West Limited)
(iii) Service Tax Appeal No. 11460 of 2015 ( Vodafone West Limited)
(iv) Service Tax Appeal No. 11461 of 2015 ( Vodafone West Limited)
(v) Service Tax Appeal No. 11462 of 2015 ( Vodafone West Limited)
(vi) Service Tax Appeal No. 11476 of 2015 ( Vodafone West Limited)
(vii) Service Tax Appeal No. 11477 of 2015 ( Vodafone West Limited)
(viii) Service Tax Appeal No. 11478 of 2015 ( Vodafone West Limited)
(ix) Service Tax Appeal No. 11479 of 2015 ( Vodafone West Limited) APPEARANCE :
Shri J.C. Patel, Advocate for the Appellant Shri Sameer Chitkara, Additional Commissioner, AR for the Respondent CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) FINAL ORDER NO. A/11984-11993 / 2019 DATE OF HEARING : 15.10.2019 DATE OF DECISION : 29.10.2019 RAMESH NAIR :
The issue involved in the present appeals is whether the services of tele-communication provided by the appellant to the international inbound roamer in Indian territory and payment thereof received from foreign telecommunication service provider, can be considered as export of service and consequently the appellant is entitled for rebate of service tax paid on 2 Service Tax Appeal No. 11447 of 2015 & Ors such services. If at all the appellant is entitled for refund, whether the same needs to be undergone the test of unjust-enrichment.
2. Shri J.C. Patel, Learned Counsel appearing on behalf of the appellants, at the outset submits that the international roamer who use the international telecommunication service are subscribers of foreign based telecommunication service provider. As regards the service, there is contract of the appellant with such foreign based telecommunication service provider and against the roaming service provided by the appellant and used by the international roamer in India, the payment is received by the appellant from the foreign based telecommunication service provider therefore, the service recipient is located outside India and the service was provided by the appellant to such service recipient and the payment is also received in convertible foreign exchange. Therefore, such service is export of service and the appellant is entitled for rebate. This issue has been considered in the various judgments of appellant's group companies and also in other judgments. He placed reliance on the following judgments:-
(a) Vodafone Essar Cellular Limited vs. CCE - 2013 (31) STR 738
(b) Vodafone Cellular Limited vs. CGST - 2019 (25) GSTL 557
(c) Vodafone Cellular Limited vs. CCE - 2014 (34) STR 890
(d) CST vs. Vodafone Indian Limited - 2015 (37) STR 286
(e) Vodafone Essar Gujarat/ Vodafone West Limited - 2015-TIOL-
2100-CESTAT-AHM
(f) Verizon Communication India P. Limited vs. Asst. Commissioner, Delhi - 2018 (8) GSTL 32 (Del)
(g) Revision Authority Order No. 01-05/2018-ST/ASRA/Mumbai dated 23.01.2018
(h) National Engineering Industries Limited vs. CCE - 2016 (42) STR 537 3 Service Tax Appeal No. 11447 of 2015 & Ors
(i) National Engineering Industries Limited vs. CCE - 2011 (24) STR 683
3. As regards the issue of unjust-enrichment, he submits that once the service is held to be export of service, unjust-enrichment is not applicable in terms of provisions of Section 11B.
4. Shri Sameer Chitkara, Learned Additional Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
5. We have carefully considered the submissions made by both sides and perused the record. We find that even though the judgments cited by the appellant are directly applicable to the case in hand, the Learned Commissioner (Appeals) despite recording the fact of judgments given by the Tribunal, discarded the same on the ground that as per Circular the said service is taxable and Circular is binding on the field formations in terms of law laid down by the Hon'ble Supreme Court in the case of Collector of Central Excise, Vadodara vs. Dhiren Chemicals - 2002 (139) ELT 3 (SC).
First of all, on merits of the case, we find that this Tribunal in following judgments, dealing with absolutely identical issue, clearly held that service provided to international roamer in India is export of service on the ground that the recipient of service located out of India and the payment is received in convertible foreign exchange, even though actual user of the service is in India :-
(i) Vodafone Essar Cellular Limited vs. CCE - 2013 (31) STR 738
5. We have carefully considered the submissions made by both the sides. As the issue is of a recurring nature and involves interpretation of law, we are taking up the appeals for consideration and disposal after waiving the requirement of any pre-deposit.4
Service Tax Appeal No. 11447 of 2015 & Ors 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 appellant's 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 customer's 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 Board's 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 5 Service Tax Appeal No. 11447 of 2015 & Ors 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 Merchant's 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.
6 In sum, we allow the appeals with consequential relief, if any. The stay applications are also disposed of.
Vodafone Cellular Limited vs. CGST - 2019 (25) GSTL 557 5.1 The issue is whether the appellants are liable to pay service tax on the international inbound roaming services received by a subscriber of foreign telecom company who visits India. It is not in dispute that the appellant had received consideration from the foreign telecom company for providing such international roaming. In other words, department does not have a case that consideration was received by the appellant from the person who was on visit in India and was receiving services from appellant as a subscriber of foreign telecom company. The international inbound roamer is not a subscriber of the appellants. The department has proceeded with the view that the actual beneficiary of the service is the inbound roamers and the appellant being a service provider for such international roaming facility, the service would fall within the levy of service tax. In fact, even though the actual beneficiary of the service is inbound roamer, there is no agreement by the appellant to provide service to the actual inbound roamer. The agreement to provide service is between the appellant and the foreign telecommunication company. Thus, for the appellant, the service recipient can only be the foreign telecommunication company and not the international inbound roamer. In case of any difficulty faced by the international inbound roamer he would call the customer care of the foreign telecom company to which he is a subscriber. Thus, as per the agreement, the appellant agrees to provide service to the foreign telecom company and therefore such foreign telecom company is the service recipient.
5.2 Since the service recipient is located outside India, as per Rule 3(iii) of Export of Services Rules, the said services would amount to export of service for the period prior to 1-7-2012. For the period after 1-7-2012, the Place of Provision of Services Rules, 2012 came to be introduced and as per Rule 3 of such Rules, the location of the service recipient has to be taken into account for deciding as to where the services have been provided. So for the entire period of dispute, since the service recipient is outside India, the same amounts to export of services.6
Service Tax Appeal No. 11447 of 2015 & Ors 5.3 In drawing such conclusion, we are assisted by the Master Circular dated 23-8- 2007 issued by the department. It may be correct that in Circular No. 90/1/2007-S.T., dated 3-1-2007 such services of providing international inbound roaming facility has been clarified by the Board not to be export of service. However, in the subsequent master circular dated 23-8-2007, it is specifically clarified that the said master circular supersedes all earlier circulars. The relevant paragraph is extracted below :-
"6. This circular supersedes all circulars, clarifications and communications, other than Orders issued under Section 37B of the Central Excise Act, 1944 (as made applicable to service tax by Section 83 of the Finance Act, 1994), issued from time to time by the CBEC, DG (Service Tax) and various field formations on all technical issues including the scope and classification of taxable services, valuation of taxable services, export of services, services received from outside India, scope of exemptions and all other matters on levy of service tax. With the issue of this circular, all earlier clarifications issued on technical issues relating to service tax stand withdrawn."
5.4 Though the Ld. AR has been at pains to argue that the above Master Circular was a clarification on technical issues only, on perusal of the above extracted portion, it is seen stated that the technical issues including the scope and classification of taxable services, valuation of taxable services, export of services, services received from outside India also fall within the scope of the master circular. Further, in the case of Verizon Communication India Pvt. Ltd. (supra), the Hon'ble Delhi High Court had considered the issue whether the master circular supersedes the earlier circulars. The Hon'ble High Court had concluded that the circular dated 23-8-2007 makes it explicit that all circulars, instructions and communications issued from time to time stand superseded by the Master Circular. The relevant paragraph is extracted below :-
"42. Circular No. 90/1/2007, dated 3rd January, 2007 concerned provision of telephony services to subscribers of international telephone service providers who may be on a visit to India and are availing the inbound roaming services. The said Circular clarified that a telephone connection did not necessarily mean providing a telephone instrument or providing sim card. Even if a number was allocated temporarily to an inbound roamer and used internally it remained a service of a telephone connection. It was clarified that during the period of roaming, "the Indian Telecom service provides telephone service to an international inbound roamer. This service to an inbound roamer is delivered and consumed in India and, therefore, is not an export of service."
43. The said Circular dated 3rd January, 2017 did not deal with telecommunication services involving transfer of electronic data. Then came the Circular No. 96/7/2007-S.T., dated 23rd August, 2007. This was on the basis of the report of the Committee chaired by Shri T.R. Rustagi, former Commissioner of Customs & Central Excise and Director General (Inspection). On the basis of comments received, the C.B.E. & C. issued the above circular. Paragraph 6 of the said circular reads thus :
"6. This circular supersedes all circulars, clarifications and communications, other than Orders issued under Section 37B of the Central Excise Act, 1944 (as made applicable to service tax by Section 83 of the Finance Act, 1994), issued from time to time by the C.B.E. & C., DG (Service Tax) and various field formations on all technical issues including the scope and classification of taxable services, valuation of taxable services, export of services, services received from outside India, scope of exemptions and all other matters on levy of service tax. With the issue of this circular, all earlier clarifications issued on technical issues relating to service tax stand withdrawn."
(emphasis supplied)
44. What this circular does is to indicate, in an Annexure thereto, the classification (by a three digit code) of services for the purposes of levy of service tax. The Annexure does not refer to "telecommunication services". This did not, however, mean that in relation 7 Service Tax Appeal No. 11447 of 2015 & Ors to "telecommunication services", the earlier Circular dated 3rd January, 2007 continued to operate. Paragraph 6 of the Circular dated 23rd August, 2007 makes it explicit that "all circulars", clarifications and communications issued from time to time stands superseded. There is nothing to replace what has been superseded as far as the Circular dated 3rd January, 2007."
(emphasis supplied) 5.5 In Para 54 of the said judgment, in sub-para (v), it has been categorically stated that with total repeal by the subsequent circular dated 23-8-2007, the earlier circular dated 3-1-2007 has no application. From the judgment rendered in Verizon Communication India Pvt. Ltd. (supra), we find that the master circular supersedes the earlier circulars issued by the Board and therefore the contention of the department that Circular dated 3-1-2007 has to be applied for levy of service tax is not sustainable.
5.6 The Ld. Counsel for appellant has also furnished the order passed by the revisionary authority in their own case vide Order No. 1-5/2018-ST/ASRA/Mumbai, dated 23-1-2018. It is submitted by the Ld. Counsel that the appellant was earlier paying service tax on these services and claiming refund/rebate. In such proceedings, wherein the refund claim was filed by the appellant after paying service tax, the revisionary authority has granted the refund after considering all the circulars as well as the decision in the appellant's own case and the case of Verizon Communication India Pvt. Ltd. (supra). Paragraphs 15 and 16 of the said revisionary order makes it clear that the revisionary authority has taken note of all the circulars of the Board as well as the decisions relied upon by the appellant to grant the refund for the period prior to 1-4- 2011. After 1-4-2011, appellant stopped paying the service tax for which show cause notices have been issued. It is clear from the order of Revisionary authority that when the appellant had paid service tax and filed refund claims on the very same services, the department has granted refund holding the services as export of services. The department has granted refund upto the period 31-3-2011. The department therefore cannot contend that the services are not export of services for the period from 1-4-2011 to 30-6-2012 and 1-10-2013 to 30-9-2014 which is the disputed periods in these appeals.
6. From the foregoing discussions, we are of the considered opinion that the services are not exigible to service tax being export of service. The impugned orders are set aside and the appeals are allowed with consequential relief, if any, as per law.
Vodafone Cellular Limited vs. CCE - 2014 (34) STR 890 5.1 As regards the merits of the case, this Tribunal in appellant's own case, vide order dated 12-3-2013 has held that the activity of providing international roaming facility to inbound travellers in India is a service provided to the foreign telecom service provider who is located outside India and, therefore, transaction constitutes export of services. This decision has been rendered after considering the provisions of Export of Service Rules, 2005 and also based on the Board's Circular No. 111/05/2009-S.T., dated 24-2- 2009. Apart from the above, the ratio of the decision in the Paul Merchants Ltd. case has also been applied. Though the Punjab & Haryana High Court has admitted the appeal of the Revenue against Paul Merchant Ltd. case, no stay has been granted. Similarly, the decision in appellant's own case though stated to have been challenged before the Hon'ble Bombay High Court, no stay has been obtained. Therefore, on merits, the appellant has a case and therefore, the appellant would be eligible for refund of the Service Tax paid on input services used in or in relation to rendering of the output service which has been exported, under Rule 5 of the Service Tax Credit Rules, 2005, read with Notification 11/2005-S.T. Therefore, the appellant would be eligible for the refund of Service Tax paid on input services.
8Service Tax Appeal No. 11447 of 2015 & Ors 5.2 Since the transaction is one of export, the principles of unjust enrichment would not be applicable to export transactions as specifically provided in Section 11B.
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 Hon'ble Apex Court in the case of Citadel Fine Pharmaceuticals and the Hon'ble Bombay High Court in the case of Everest Flavours Ltd. and other decisions of the Hon'ble 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 dated 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.
6. The appeals are disposed of in the above terms.
6. From the above judgments, it can be seen that identical issue has been considered and it was held that service in question is export of service.
The issue of unjust-enrichment was also considered in the above judgments on which it was held that in case of export of service, provisions of unjust-
enrichment is not applicable. Therefore, the appellant is entitled for the refund on both the counts i.e. on merits as well as on unjust-enrichment.
7. As regards the observations of Learned Commissioner (Appeals) on unjust-enrichment that he has not given credit to the Tribunal decision on the ground that Board Circular is binding on departmental officer, referring to the judgment of Hon'ble Supreme Court in the case of Dhiren Chemicals (supra), we find that the law laid-down by the Hon'ble Supreme Court in the case of Dhiren Chemicals (supra) shall apply only in those cases where on the issue there is no judgment of any appellate authority or higher forums.
9Service Tax Appeal No. 11447 of 2015 & Ors In the present case, the Tribunal having considered the said Board Circular came to the conclusion that the service is export of service and the same is not taxable. In this position, the Circular become null and void and lost its legal sanctity. Even if, Board Circular, if any, is in operation and, if Tribunal has passed a judgment, the Tribunal judgment will prevail and not the Board Circular. Moreover, the Board Circular is not binding on the Commissioner (Appeals) being an independent appellate authority. Therefore, the entire case decided by the Learned Commissioner (Appeals) discarding the Tribunal judgment amounts to serious judicial indiscipline.
8. As per our above discussions, the impugned orders are set-aside and appeals are allowed.
(Pronounced in the open court on 29.10.2019) (Ramesh Nair) Member (Judicial) (Raju) Member (Technical) KL