2024 (8) TMI 1212 - AT - Service Tax

Classification of services - Technical Inspection and Certification Services or Business Auxiliary Services - export of services under Export of Service Rules 2005 or not - suppression of facts - invocation of extended period of limitation - penalty. Whether the services rendered by the appellant fall Technical Inspection and Certification Services or as Business Auxiliary Services ? - HELD THAT - Admittedly the services rendered by the appellant are undertaken on behalf of the parent company and therefore rightly classifiable under Business Auxiliary Service as claimed by the appellant. Moreover Technical Inspection and Certification Service is complete only when the certificate is issued and in the instant case admittedly the certificate is issued by the parent company. Therefore the question of classifying the same under Technical Inspection and Certification Service is ruled out. Whether irrespective of classification these services can be considered as export of services under Export of Service Rules 2005 ? - HELD THAT - As per Export of Service Rules 2005 under Rule 3 (1)(ii) proviso it clearly reads as Provided that where such taxable service is partly performed outside India it shall be treated as performed outside India; therefore in the instant case a service is partly performed outside India and it has to be treated as performed outside India. Hence as rightly claimed by the appellant the services are to be treated as Export of Service. Similarly in the case of COMMISSIONER OF SERVICE TAX MUMBAI-III VERSUS M/S. SGS INDIA PVT. LTD. 2014 (5) TMI 105 - BOMBAY HIGH COURT the Hon ble High Court observed the Tribunal takes a view that if services were rendered to such foreign clients located abroad then the act can be termed as export of service . Such an act does not invite a Service Tax liability. Whether facts were misrepresented/suppressed so as to invoke extended period and impose penalty under various Sections of the Finance Act 1994? - HELD THAT - It is a fact that the appellant has been filing Service Tax returns regularly and has paid Service Tax on various services rendered within India; therefore there being no mis-representation of facts the said services being partly undertaken in India and partly abroad the question of paying tax on export of services did not arise. Therefore when there is no liability itself the question of suppression of facts does not arise. The impugned order is set aside and the appeal is allowed.

Summary

Issues Involved:
1. Classification of services: Whether the services rendered by the appellant fall under 'Technical Inspection and Certification Services' or 'Business Auxiliary Services'.
2. Export of Services: Whether the services can be considered as export of services under 'Export of Service Rules, 2005'.
3. Extended period of limitation and penalty: Whether facts were misrepresented/suppressed to invoke the extended period and impose penalty under various Sections of the Finance Act, 1994.

Detailed Analysis:

1. Classification of Services:
The appellant, M/s. UL India Private Limited, is an Indian subsidiary of M/s. Underwriters Laboratories Inc., USA. The appellant provides inspection services to its parent company, which involves inspecting manufacturing processes and facilities of Indian customers and reporting back to the parent company. The Commissioner held that these services fall under 'Technical Inspection and Certification Services' as defined under Section 65 (108) of the Finance Act, 1994. However, the appellant argued that these services should be classified under 'Business Auxiliary Service' because they are performed on behalf of the parent company and do not involve direct contracts with the end customers. The Tribunal agreed with the appellant, stating that the services are undertaken on behalf of the parent company and therefore fall under 'Business Auxiliary Service' as per clause (vi) of the definition.

2. Export of Services:
The appellant contended that the services should be considered as export of services under Rule 3(1)(iii) of Export of Service Rules, 2005, because the services are provided to a recipient located outside India, delivered and used outside India, and paid for in convertible foreign exchange. The Tribunal referred to various precedents, including the cases of Sun Microsystems and SGS India Pvt. Ltd., to conclude that the services are partly performed in India and partly outside India. Therefore, as per the proviso to Rule 3 (1)(ii) of Export of Service Rules, 2005, these services should be treated as performed outside India and thus qualify as export of services.

3. Extended Period of Limitation and Penalty:
The appellant argued that the extended period of limitation should not be invoked because the issue involves the classification of services, which requires analysis and interpretation of service tax provisions. The appellant had duly filed Service Tax returns and there was no misrepresentation or suppression of facts. The Tribunal agreed, noting that the appellant had been regularly filing Service Tax returns and paying Service Tax on services rendered within India. Since the services were partly performed outside India and classified as export of services, there was no liability to pay tax on these services, and thus, no suppression of facts occurred.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal with consequential relief, confirming that the services rendered by the appellant are classified under 'Business Auxiliary Service', qualify as export of services under the Export of Service Rules, 2005, and do not attract the extended period of limitation or penalties.