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2015 (10) TMI 2221 - CESTAT MUMBAI

2015 (10) TMI 2221 - CESTAT MUMBAI - TMI - Export of services or not - rendered or delivered outside India - Denial of rebate claim of service tax paid under Notification No.11/2005-ST on custodial services provided to Foreign Institutional Clients (FII’s) located outside India – compliance of condition of Rule 3 (ii) of the Export of Service Rules, 2005 - Receipt in convertible foreign exchange.

Held That:- Services rendered to Foreign Institutional Clients in respect of investments .....

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see.

Rebate claim for the Month of March 2007 - there is a change in the provisions of Rule 3(ii) of the Export of Service with effect from 01.03.2007, which mandates the requirement of payment of the services provided, in convertible foreign exchange. - Matter remanded back for rebate claim relating to March 2007 – Decided partly in favour of assessee. - APPEAL No. ST/339, 340/11 - Dated:- 5-8-2015 - Mr. M.V. Ravindran, Member (Judicial) And Mr. C.J. Mathew, Member (Technical) For .....

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Banking and Financial Services under Section 65(105)(zm) for the period May 2006 to March 2007. Both the lower authorities have held against the appellant on the ground that (a) Services rendered by the appellant cannot be treated as delivered outside India (i) As the securities accounts are maintained on server in India. (ii) Service of maintaining accounts as well as custody of share is done in India. (b) Services of custody have been used in India as the same has been provided in relation to .....

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ia and the amount is received in convertible foreign exchange. It is his submission that during March 2007, the provisions have been changed and the requirement of complying with the condition of receipt of such services in convertible foreign exchange needs to be satisfied. He would submit that for the period in question in March 2007 the matter may be remanded back to the adjudicating authority as appellant are in a position to satisfy the adjudicating authority regarding the receipt of the pa .....

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vice Rules, 2005 in as much the appellant has not adduced any evidence that the services are delivered outside India and are used outside India and the amount received in convertible foreign exchange. 5. On consideration of the submissions made by both the sides and perusal of the records, we find that the issue involved in this case is regarding the refund of the amounts claimed by the appellant on the ground that they had export of custodial services rendered by them to the clients situated ou .....

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horities for more than one reason. 5.3 Firstly, the services rendered by the appellant are to Foreign Institutional Clients in respect of investments made by them in India. 5.4 Secondly, the services are for the companies situated abroad hence they are rendered or delivered outside India for the Companies situated abroad. 5.5 Thirdly, on plain reading of the provisions of Rule 3(1)(iii), we find that the sub rule reads as under:- 3. (1) the export of taxable service shall in relation to taxable .....

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be provision of such services to a recipient located outside India at the time of provision of such service. Provided that where such recipient has commercial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of service only when order for provision of such service is made from any of his commercial establishment or office located outside India. 5.6 It can be seen from the above reproduced Rule that rule talks about the services wh .....

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ess or Commerce of the said FII which are situated abroad. 5.6 We find strong force in the contentions raised by the learned Counsel that the issue is now covered by the judgement of the Tribunal in the case of Nipuna Services Ltd. (supra) (in which one of us was a Member). We reproduce the ratio of the said judgment from the relevant paragraphs:- 15. Now we have to understand the effect of amendment by Notification No. 13/2006-S.T., dated 19-4-2006 for clarity we are reproducing the said amendm .....

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, for the words, brackets and figures sub-section (1) and sub-section (2) of section 94, the words and figures sections 93 and 94 shall be substituted : 3. In the said rules, for rule 3, the following rule shall be substituted, namely :- 3. Export of taxable service. - (1) Export of taxable services shall, in relation to taxable services, - (i) specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), (zzzh) and (zzzr) of clause (105) of section 65 of the Act, be provision of .....

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ices as are performed outside India: Provided that where such taxable service is partly performed outside India, it shall be treated as performed outside India; (iii) specified in clause (105) of section 65 of the Act, but excluding, - (a) sub-clauses (zzzo) and (zzzv); (b) those specified in clause (i) of this rule except when the provision of taxable services specified in sub-clauses (d), (zzzc) and (zzzr) does not relate to immovable property; and (c) those specified in clause (ii) of this ru .....

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f his commercial establishment or office located outside India. (2) The provision of any taxable service shall be treated as export of service when the following conditions are satisfied, namely : (a) such service is delivered outside India and used outside India; and (b) payment for such service provided outside India is received by the service provider in convertible foreign exchange. Explanation. - For the purposes of this rule India includes the designated areas in the Continental Shelf and .....

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) enumerates a large number of taxable service within its scope. Rule 3(1)(iii) excludes certain services from its scope. Rule 3(2) states that the provision of any taxable service shall be treated as Export of Service when the following conditions are satisfied, namely (i) (ii) (i) such service is delivered outside India and used outside India; and (ii) payment for such service provided outside India is received by the service provider in convertible foreign exchange. Explanation. - For the pur .....

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receipt of payment in foreign exchange rate so as to quality as export of Foreign Service. In other words, 3(1) and 3(2) appear to be independent. As far as the appellant is concerned, their services would squarely fall within the category of 3(1) and therefore, the conditions given in 3(2) would not be applicable to them. In fine, Notification dated 19-4-2006 has also not changed the position as far as the appellant is concerned. 17. Now let us examine the last amendment vide Notification 2/20 .....

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2005, in rule 3, for sub- rule (2), the following sub-rule shall be substituted, namely:- (2) The provision of any taxable service specified in sub-rule (1) shall be treated as export of service when the following conditions are satisfied, namely :- (a) such service is provided from India and used outside India; and (b) payment for such service provided outside India is received by the service provider in convertible foreign exchange. Explanation. - For the purposes of this rule India includes .....

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vices which are mentioned in sub-rule (1) including the services rendered by the appellant would be deemed to be treated as export of service only when the payment is received by the service provider in convertible foreign exchange. Alternatively, the appellant has to fulfill the conditions of receipt of payment in convertible foreign exchange only with effect from 1-3-2007. As the period involved in the present case is prior to 1-3-2007, the appellant is not hit by the said condition. Legally t .....

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. If Revenues contention is accepted it would amount to levying service tax on services exported. It is axiomatic that goods and services exported would not be subjected to local taxes. Denying the refund would violate this fundamental principle of taxation. Further, the fact of the matter is Satyam (India) acts as an agent of the appellant. They procure business for the appellants by virtue of their brand image and reputation. It is the appellants who render the services directly to the recipi .....

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