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2022 (2) TMI 411 - AT - Service TaxClassification of goods - whether footwear, in respect of which patterns and designs were received by the appellant, is an article intended to be worn by human beings? - fashion designing services would fall under rule 3(ii) of the Import Rules or not - HELD THAT:- There can possibly be no doubt that footwear is worn by human beings. The Tribunal in M/S VIROLA INTERNATIONAL VERSUS COMMISSIONER, CUSTOMS, CENTRAL EXCISE & SERVICE TAX, KANPUR [2018 (8) TMI 23 - CESTAT ALLAHABAD] also examined this precise issue. The appellant therein had paid certain amount to an entity outside India towards collection and development of samples of footwear and footwear components, which samples were used by them for display before the overseas buyers for obtaining export orders. The appellant contended that it was manufacturing footwear and the service received by it would be “fashion designing” service since the activity was in relation to “any other articles intended to be worn by human beings”. The adjudicating authority accepted this contention of the appellant and further held, that in view of the provisions of rule 3(ii) of the Import Rules, it was not taxable under the reverse charge mechanism. What needs to be noticed is that in the earlier round of proceedings concerning the previous years for which the appellant had claimed refund of the amount paid as service tax under “fashion designing” services as it was not required to pay tax, the classification of the service received by the appellant as falling under “fashion designing” was not disputed by the Department. The Department cannot now be permitted to classify the same element of service provided to the appellant under a different head in subsequent proceedings - It is also not possible to accept the contention of the learned authorized representative appearing for the Department that “footwear” articles would be covered under consumer goods and, therefore, would fall in the definition of “design services”. When a footwear is worn by human beings it is specifically covered under “any other articles intended to be worn by human beings” and, therefore, any activity relating to footwear would be covered by “fashion designing” services. Paragraph 3 does not limit the “fashion designing” services to articles made up of clothes. Infact, it specifically provides that a fashion designer may be involved in designing of any goods which are intended to be worn by human beings. Paragraph 4 deals only with a specific query raised as to whether tailors and jewellers will be covered under the service tax. It does not talk about a manufacturer of leather footwear for women. Whether “fashion designing” services would fall under rule 3(ii) of the Import Rules? - HELD THAT:- The “fashion designing” services fall under section 65(105)(zv) of the Finance Act and, therefore, would be covered in the second category of rule 3(ii) of the Import Rules. These services are performed outside India and, therefore, cannot be made taxable under rule 3(ii) of the Import Rules. In this connection reliance has been placed on the decision of the Tribunal in INTAS PHARMACEUTICALS LTD. VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD [2009 (5) TMI 73 - CESTAT, AHMEDABAD], wherein it has been held that if services are entirely provided outside India, the proviso to rule 3(ii) of the Import Rules is not applicable and no tax can be levied on the same. Such being the position, the impugned order cannot be sustained - appeal allowed - decided in favor of appellant.
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