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2014 (3) TMI 696 - CESTAT NEW DELHIExport of services or not - place of provision of services - location of recipient - receipt in foreign exchange - business auxiliary service - services in relation to export of goods - giving recommendation about the product integrity, inspecting export consignments and issuing inspection certificates, screening the vendor’s suitability in terms of child labour norms and pollution control norms and recommending the teams to be engaged in logistic work like transportation, clearing and forwarding etc. for export of the purchased products out of India - Export of Service Rules, 2005 - Held that:- the arguments of the department are absurd as the DR has not mentioned as to who is the consumer of the services in India, if the services, in question, provided in India by the appellant have not been used and consumed by their principal in U.S.A. It would be absurd to say that the recipient and user of these services are the persons in India and not M/s GAP, U.S.A. for whom all these services provided by the appellant are meant, who have used these services for their business and have made payment for these service in convertible foreign exchange. The Export of Service Rules, 2005 and Taxation of Service (provided from outside India and received in India) Rules, 2006, readwith Section 66A of the Finance Act, 1994 are fully in accordance with the law laid down by the Apex Court in case of All India Federation of Tax Practitioners [2007 (8) TMI 1 - Supreme Court] and Association of Leasing and Financial Service Companies (supra) that service tax is a value added tax, which, in turn, is a destination based consumption tax in the sense that it is not a charge on business but is a charge on the consumer. Therefore what constitutes export of service has to be decided strictly in accordance with the provisions of Export of Service Rules, 2005 and for this purpose, in case of services in relation to business or commerce covered by Rule 3 (1) (iii), the term ‘service recipient’ has to be understood in the sense as explained in para 8.3. The performance of such service in India, would not make them received/consumed in India, if beneficiary user/recipient of said service provided in relation to business or commerce, who has paid for these service and has used the service in his business, is located abroad. - The position would be different if the company located abroad who has paid for the service, also has some branch/ project in India and the service provided in India is meant for that branch/project only in that case, the consumption of service would be in India and the service would be taxable in India. The Boards Circular No. 141/10/2011 dated 13/5/11 clarifying that for the period prior to 27/2/10, the condition regarding ‘used outside India’ also needs to be independently satisfied for availing the benefit of export and that ‘effective use of advertisement services’ shall be the place where the advertising material is disseminated to the audience though the actual benefit to my finally accrue to the buyer who is located at another place is not only not in accordance with the provisions of Rule 3 (1) of the Export of Service Rules, 2005, but is also contrary to the law laid down by the Apex Court in the case of All India Federation of Tax Practitioners [2007 (8) TMI 1 - Supreme Court] and Association of Leasing and Financial Service Companies [2010 (10) TMI 4 - SUPREME COURT OF INDIA], as a service which has not been consumed in India, cannot be taxed in India. In any case, the issue involved in this case is identical to the issue involved in the case of Paul Merchant Ltd. and Ors. vs. CCE [2012 (12) TMI 424 - CESTAT, DELHI (LB)] which stands decided in favour of the appellant. - order set-aside - Decided in favor of assessee.
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