2017 (3) TMI 1025 - AT - Service Tax

Refund claim - Rule 5 of the CCR, 2004 - whether the services provided onsite to the clients located abroad can be considered as export of services or not? - Held that - Service provided from outside the taxable territory to a person located outside the taxable territory are not services for the purpose of these rules. In view of above, the services provided onsite to the clients located abroad cannot be considered as part of export turnover or part of total turnover - reliance was placed in the case of Nihilent Technologies Pvt Ltd. Versus The Commissioner of Service Tax, Pune 2016 (9) TMI 324 - CESTAT MUMBAI , where it has been held that onsite services are to be excluded from both Export turnover and total turnover - appeal dismissed - decided against Revenue.

Summary

Issues involved:
Refund under Rule 5 of Cenvat Credit Rules, 2004 on export of services; Interpretation of Rule 6A(1) of the Service Tax Rules, 1994; Inclusion of onsite services in export turnover and total turnover.

Analysis:
1. Refund under Rule 5 of Cenvat Credit Rules:
The appeal was filed by Revenue against the order of Commissioner (Appeals) regarding the refund claimed by the respondent under Rule 5 of the Cenvat Credit Rules, 2004 on the export of services. The Revenue contended that the total turnover should include the value of both offshore and onsite services provided by the respondent. The Commissioner (Appeals) had sanctioned the refund based on a previous Tribunal order. However, the Revenue argued that post-1.7.2012, the provisions under Rule 6A(1) of the Service Tax Rules, 1994 needed to be considered, which set conditions for a service to be treated as an export of service.

2. Interpretation of Rule 6A(1) of Service Tax Rules, 1994:
The crux of the issue lay in determining whether onsite services provided by the respondent's overseas branches satisfied the conditions under Rule 6A(1) to be considered as an export of service. The Revenue contended that as per the new Rule 6A(1) introduced post-1.7.2012, the first condition, i.e., the provider of service being located in the taxable territory, was not satisfied in the case of onsite services provided by overseas branches. Therefore, they argued that the value of onsite services should not be included in the export turnover. The argument was supported by a decision in the case of Nihilent Technologies, where it was held that onsite services should be excluded from both export turnover and total turnover.

3. Inclusion of onsite services in export turnover and total turnover:
The Tribunal analyzed the provisions of Rule 5 of Cenvat Credit Rules, 2004 along with Rule 6A(1) of the Service Tax Rules, 1994 to determine the treatment of onsite services in the export turnover and total turnover. The Tribunal concluded that post-1.7.2012, onsite services provided to clients located abroad could not be considered as part of the export turnover or total turnover. Therefore, the appeal by Revenue was dismissed, and the cross-objection was disposed of accordingly.

In conclusion, the Tribunal's judgment clarified the interpretation of rules governing the refund on export of services and the treatment of onsite services in the export turnover and total turnover, providing a detailed analysis based on the legal provisions and relevant precedents.