TMI Blog2020 (12) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clear that the appellant supports such foreign companies to procure orders in India. Such service is provided from India and used outside India. The service rendered by the appellant would, therefore, satisfy the twin conditions set out in rule 3(2) of the 2005 Rules as has also been clarified by the Circular dated February 24, 2009. Appeal allowed - decided in favor of appellant. - SERVICE TAX APPEAL No. 52321 OF 2016 - FINAL ORDER NO. 51648/2020 - Dated:- 8-12-2020 - SHRI JUSTICE DILIP GUPTA, PRESIDENT AND SHRI P. ANJANI KUMAR, MEMBER (TECHNICAL) Shri B. L. Narasimhan, Advocate for the Appellant Shri Anup Thapliyal, Authorised Representative for the Respondent ORDER This appeal seeks to challenge the order dated May 5, 2016 passed by the Commissioner (Appeals), Customs, Central Excise and Service Tax, Bhopal [ the Commissioner (Appeals) ], by which the appeal filed by appellant for setting aside the order dated February 25, 2014 passed by the Additional Commissioner confirming the demand of service tax by invoking the period of limitation under the proviso to section 73(1) of the Finance Act, 1994 [the Finance Act], has been dismissed. 2. The is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner was assailed by the appellant by filing an appeal before the Commissioner (Appeals). The Commissioner (Appeals) dismissed the appeal by order dated May 5, 2016 and the relevant portion of the order is reproduced below: The appellant have not contested the issue of provision of services or the receipt of commissioner. Their only contention is that since that have provided services to the clients, located outside India, the payment received is exempt from service tax as it is covered by export of service. Thus for the services to be treated as export of services, the recipient should be located outside India and order for provision of such service is made from any of his commercial establishment or office located outside India, and the remittance should be in foreign currency. To ascertain the facts, appellant were required to produce all the relevant documents viz copy of agreement with the recipient of services, party wise, copy of invoices as issued to the recipient of services etc. in order to establish that the commission received was for provision of services outside India, however the appellant failed to produce the same. The appellant have submitted some fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax as the services would not qualify as export of service . 9. The submissions advanced by learned counsel for the appellant and the learned authorized representative of the Department have been considered. 10. In order to appreciate the rival contentions, it would be appropriate to reproduce the relevant portions of the 2005 Rules as they existed prior to and after the amendment made w.e.f February 27, 2010. Prior to February 27, 2010 11. Rule 3 of the 2005 Rules deals with export of taxable service . Rule 3(1)(ii) specifies the taxable services provided in sub-clauses of clause (105) of section 65 of the Finance Act. Sub-rule(2) of rule 3 of the 2005 Rules provides for two conditions to be satisfied for treating any taxable service as export of service and is reproduced below: 3(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 is received by the service provider in convertible foreign exchange. From February 27, 2010 12. Sub-rule (2) of rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India, it cannot be said that the use of the service has been outside India. 3. It is an accepted legal principle that the law has to be read harmoniously so as to avoid contradictions within a legislation. Keeping this principle in view, the meaning of the term 'used outside India' has to be understood in the context of the characteristics of a particular category of service as mentioned in sub-rule (1) of rule 3. For example, under Architect service (a Category I service [Rule 3(1)(i)], even if an Indian architect prepares a design sitting in India for a property located in U.K. and hands it over to the owner of such property having his business and residence in India, it would have to be presumed that service has been used outside India. Similarly, if an Indian event manager (a Category II service [Rule 3(I)(ii))] arranges a seminar for an Indian company in U.K. the service has to be treated to have been used outside India because the place of performance is U.K. even though the benefit of such a seminar may flow back to the employees serving the company in India. For the services that fall under Category III [Rule 3(1)(iii)], the relevant factor is the locati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace outside India. In a situation where the consultancy, though paid by a client located outside India, is actually used in respect of a project or an activity in India the service cannot be said to be used outside India. 3. It may be noted that the words accrual of benefit are not restricted to mere impact on the bottom-line of the person who pays for the service. If that were the intention it would render the requirement of services being used outside India during the period prior to 28-2-2010 infructuous. These words should be given a harmonious interpretation keeping in view that during the period upto 27-2-2010 the explicit condition was provided in the rule that the service should be used outside India. In other words these words may be interpreted in the context where the effective use and enjoyment of the service has been obtained. The effective use and enjoyment of the service will of course depend on the nature of the service. For example effective use of advertising services shall be the place where the advertising material is disseminated to the audience though actually the benefit may finally accrue to the buyer who is located at another place. 4. This, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative documents 19. As noted above, the commission amount was received by the appellant from foreign principals in convertible foreign exchange for which debit notes and the corresponding certificates of foreign inward remittance issued by the banks were submitted by the appellant before the Adjudicating Authority. The debit note for commission and the corresponding FIRC have been enclosed from pages 108 to 144 of the paper-book. It is, therefore, apparent that the appellant had received commission in convertible foreign exchange for the service rendered outside India to foreign companies. 20. It would be seen from the aforesaid factual position stated by the appellant in reply to the show cause notice that the appellant had been representing various foreign companies in India and these foreign companies did not have any business or any office in India. The appellant promoted the business of such foreign companies in India and as a consideration for this service, the appellant received commission from the foreign companies in convertible foreign exchange. The appellant has also described the manner in which it had promoted the business of such foreign companies from which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Business Auxiliary Services covered by Section 65 (105) (zzb) readwith Section 65 (19) of the Finance Act, 1994. The only point of dispute is as to whether the services are taxable in India or the same are export of service outside India in terms of Service Rules, 2005 and for this reason are not taxable in India. Though the services have been performed in India, these services being Business Auxiliary Services are in respect of the business of the appellant s principal located abroad. The services being provided by the appellant are obviously meant for and are used by M/s GAP, U.S.A. for their business. The services being provided by the appellant are covered by Clause (iii) of Rule 3 (1) of Export Service Rules, 2005, as these services are in relation to business or commerce and in terms of this clause, readwith sub-rule (2) of Rule 3, these services would be treated as exported out of India if the recipient is located outside India and the same have been delivered outside India and used India and payment for the same has been received by the service provided in convertible foreign exchange. There is no dispute that the payment for these services has been received in conver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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