TMI Blog2017 (8) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... audi Arabian Airlines located in Jeddah, Saudi Arabia. It is also clear that scope of these services to be provided by the appellant included soliciting, promoting and selling passenger air transportation for Saudia, assistance in all operations likely to encourage traffic on Saudia's Airlines. Evidently, these activities performed by the appellants are contracted to have beneficial impact on air transportation traffic on Saudi Airlines. Although the appellants have been contracted as Saudias GSA for the territory of Tamil Nadu, Andhra Pradesh, Karnataka and Kerala, appellant as a GSA is authorized to make sales over the services of Saudia and any other carrier with whom Saudia has interline traffic agreements. Soliciting and promoting of passenger air transportation is permitted to be done by the appellant on all lines awarded out by Saudia - Evidently, the commercial services provided by the appellant, inter alia, soliciting, promoting and selling passenger air transportation and cargo and mail transportation for Saudia is very much a Business Auxiliary Service, ordered by Saudi Arabian Airlines, Jeddah, to benefit all such service flowing to Saudias business. Whether retentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the category of Business Auxiliary Service. These proposals were confirmed / upheld by lower authorities along with interest thereon and also imposition of penalties under various provisions of law. Aggrieved, the appellants have filed these appeals before this forum. 3. On 22.07.2017, when the matter came up for hearing, on behalf of appellant, Ld. Consultant Shri R. Viswanathan submitted a table of the issues involved in the appeals filed by them, which is extracted below for ready reference : Appeal No. Year/Period Issue Notn. applicable Export Rules ST/214/2007 1.7.2003 to 30.6.2006 1.7.2003 to 15.3.2005 Denial of Export for ORC Circular No.56/5/03 dt. 5-4-2003 -do- 16.3.2005 to 19.4.2006 19.04.2006 to 30.06.2006 Denial of Export for ORC Notn. No.9/2005 Notn. No.13/2006 ST/122/2008 1.7.2006 to 31.3.2007 Denial of Export for ORC Notn. No.13/2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a foreign company incorporated under the laws of Saudi Arabia and is located at Jeddah, Saudi Arabia. v) Saudi Arabian Airlines is appointing the Appellant as a General Sales Agent only because they are not in a position to come to India and get the work done. vi) As a result of the promotion work of the Appellant, the turnover of Saudi Arabian Airlines only goes up and all the sales of tickets are revenues of a foreign airlines company. vii) All notices, requests, demands, instructions, communications shall be sent only to Saudi Arabian Airlines, Jeddah, Saudi Arabia. This clause shows that all communications to the Airline has to be sent only to Saudi Arabia. viii) The Agreement itself has been executed in Saudi Arabia. The contract has also been executed outside India and the service receiver is Saudi Arabian Airlines located outside India. ix) The very fact that the Overriding Commission (ORC) is being calculated on net flown revenue shows that only when the business is achieved and the turnover in Saudi Arabia is calculated, therefore the Appellant qualifies for ORC. x) The Appellant provided services in relation to business or commerce to Saudi A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough Indian Railways in Indian rupees in lieu of foreign exchange as less foreign exchange is not in violation of Export of Service Rules. 6. On the other hand, on behalf of the department Shri B. Balamurugan, Ld. A.R supports the impugned orders and also made oral submissions which can be summarized as under : (i) Service provided by the appellant falls under BAS. The services provided by the GSA to Saudia cannot be considered as export of service under Rule 3(3) of Export of Service Rules, 2005, in as much as, the appellant has provided the service within a limited territory, which is within India and further action in and outside India are taken care of by Saudia. Therefore, they have not satisfied the main condition, i.e., the services so ordered are delivered outside India and used in business outside India. (ii) The agreement clearly demarcates the jurisdiction (Tamil Nadu, Andhra Pradesh, Karnataka and Kerala) beyond which the appellant do not have any role to play on behalf of Saudia. (iii) The appellants responsibility ceases after issue of Ticket/Airway bills on all further activities on any claims, demand, cost which are undertaken by Saudia. (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide administrative service to Saudia. 7.3 Article IV of the captioned agreement Commission to GSAcontains various commissions applicable to GSA. Para 1 of clause B of the said Article IV states that Saudia will pay GSA Normal and Overriding Commission (ORC) for air transportation over the service of Saudia sold only in the allowed territory by the GSA or sub-agents on Saudias traffic documents/ticket stock. Paras II III also contains the entitlement of normal commission/overriding commission to GSA. In terms of the above agreement, the assessee admittedly are in receipt of 3% ORC on passenger sales and 2.5% on cargo sales. 7.4. The appellant has prima facie accepted that the overriding commission falls under the category of service BAS and is chargeable to tax accordingly. However, the appellants contention is that the service is rendered to Saudia as the part of the above agreement and the same is to be treated as export of services and therefore the appellant has pleaded that they are exempted from payment of service tax. As regards the terms of payment in Indian Rupees which militates against the conditions stipulated under export of service rules, the appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommerce or industry and the recipient of such services is located outside India: Provided that if such recipient has any commercial or industrial establishment or any office relating thereto, in India, such taxable services provided shall be treated as export of services only if- (a) order for provision of such service is made by the recipient of such service from any of his commercial or industrial establishment or any office located outside India; (b) service so ordered is delivered outside India and used in business outside India; and (c) payment for such service provided is received by the service provider in convertible foreign exchange; (ii) such taxable services which are provided and used, other than in or in relation to commerce or industry, if the recipient of the taxable service is located outside India at the time when such services are received. Explanation.-For the purpose of this rule Indiaincludes the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs Nos. S.O.429(E), dated the 18th July, 1986 and S.O.643(E), d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convertible foreign exchange. It is the last conditionality concerning receipt of payment in convertible foreign exchange that is the hub of this controversy in these appeals. 7.9 Subsequent amendments to the Export of Service Rules also retained the requirement that payment for service provided is received by the service provider in convertible foreign exchange. 7.10 There is no dispute that the services of the appellant have been contracted by its office of Saudi Arabian Airlines located in Jeddah, Saudi Arabia. It is also clear that scope of these services to be provided by the appellant included soliciting, promoting and selling passenger air transportation for Saudia, assistance in all operations likely to encourage traffic on Saudia's Airlines. Evidently, these activities performed by the appellants are contracted to have beneficial impact on air transportation traffic on Saudi Airlines. Although the appellants have been contracted as Saudias GSA for the territory of Tamil Nadu, Andhra Pradesh, Karnataka and Kerala, appellant as a GSA is authorized to make sales over the services of Saudia and any other carrier with whom Saudia has interline traffic agreements. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due for transportation sold during previous month would fall foul of the requirement in Rule (3) (3) of the Rules that payment for such service is received in convertible foreign exchange. 10. On this contentious issue (whether payment has been received in foreign exchange), Revenue has placed considerable reliance on the ratio of Tribunal decision in ETA Travels Agency Pvt. Ltd. Vs CCE Chennai vide Final order No.452/2007 dt.20.04.2007 2007 (7) STR 454 (Tri.-Bang.). The lower authorities in these appeals have relied upon the said decision. We find that in the ETA Travels case, appellant therein had received commission from the airlines by way of credit notes. The credit notes mentioned the amounts in terms of Indian rupee and such amounts were credited to the appellants bank account. The Tribunal held that no part of the overriding commission (ORC) was received by way of inward remittance in convertible foreign exchange. Hence ORC received cannot be considered as receipts of convertible foreign exchange. Ld.A.R for Revenue has pointed out that this decision was followed by the Tribunal in the case of Trans Lanka Air Travel Pvt. Ltd. Vs CST Chennai - 2007 (7) STR 476 (Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Tribunal held that the services rendered have been exported in terms of Rule 3 (2) of the Export of Service Rules, 2005. In the case of Sun-Area Real Estate Pvt. Ltd. Vs CST Mumbai-I -2015 (5) TMI 885-CESTAT-Mumbai , the Tribunal relying upon the Apex court judgment in the case of J.B. Boda Company Pvt. Ltd. Vs CBDT - AIR 1987 (SC) 1543 held that when out of the total payment to be made by the insurance broker in India to the foreign insurer, the same was reduced to the extent of his brokerage and remaining amount was remitted to foreign insurer in foreign exchange, such Indian rupees was obtained in lieu of foreign exchange the same will be deemed to be convertible exchange. The Tribunal decision also took note of Foreign Exchange Management Act provision that if payment in Indian rupees is received through banking channel its deemed to be convertible foreign exchange. 11. We are informed that CESTAT Delhi in the case of B ird Travels (P) Ltd. Vs CCE Delhi - 2016 (45) STR 143 (Tri.-Del.), inter alia, placing reliance on decision in ETA Travels (supra) has taken a contrary view. However, by the principle of stare decisis this Tribunal is enjoined to follow the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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