TMI Blog2022 (5) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... tween M/s ATA Freightline Ltd, New York and M/s ATA Freightline (India) Pvt Ltd was split as one within India and one thereafter by appropriating the accountal segregation adopted by the appellant. Place of Provision of Service Rules, 2012 is not a provision for charging of tax; it is limited to determination of location of taxable entity as an adjunct to the charging provision in section 66 B of Finance Act, 1994. The impugned order has not evaluated the impugned activity from that perspective. In the context of identifiable recipient of service located outside the taxable territory, and concomitant absence of goods provided by recipient of service as well as the marked absence of recipient of service in the truncated segment of impugned activity and of the goods being put to use for rendering of service, rule 4 of Place of Provision of Service Rules, 2012 is not applicable. That the activity is transportation of goods is the foundation of the proceedings against the appellant, as is evident from the contrived segmentation of stages according to geography and from the unarguable existence of recipient outside India; rule 10 of Place of Provision of Service Rules, 2012 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration from an entity outside India in convertible foreign exchange , in conformity with rule 6A of Service Tax Rules, 1994. It is also argued that, in accordance with paragraph 5.4.1 of Revised Education Guide on Taxation of Services dated 20th June 2012, such service is rendered outside India. Reliance was placed on the decision of the Tribunal in Commissioner of Central Excise, Pune v. Sai Life Sciences Ltd [2016 (42) STR 82] which was reiterated in Commissioner of Central Excise, Pune v. Advinus Therapeutics Ltd [2017 (51) STR 298]. Pointing out that export of service had not undergone any significant change in the rollover to the negative list , Learned Counsel argued that the decision of the Tribunal in Commissioner of Central Excise v. BA Research India Limited [2010 (18) STR 439], having been upheld by the Hon ble High Court of Bombay, did not leave any room for doubt on the tax exempt status of such exports. 4. Narrating the activities of the appellant that came under scrutiny, it was averred by Learned Counsel that the contractual arrangement with the overseas entity was a composite assignment of jobs for transportation of goods to destinations outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 2012, in supersession of the scheme of impost on enumerated taxable services , becomes operable on occurrence of taxable event , viz. activity carried out by a person for another for consideration to the extent of ..the value of all services, other than those specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another in section 66B of Finance Act, 1994 and the limiting constraint therein necessitated machinery for ascertainment of place of provision of service. As a largely destination based consumption tax leviable on services provided within the country , in the words of the Hon ble Supreme Court in All India Federation of Tax Practitioners v. Union of India [2007 (7) STR 625], manifested only in satisfaction of the recipient for which recompense is made over to the provider, the generalized definition of the taxable event , unlike the flexibility of the erstwhile enumerated taxable services , was amenable to determination of export or import only by a conceptual framework offering a reference point for these two outliers; the Place of Provision of Service Rules, 2012 specifies the default principle in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as the default in Place of Provision of Service Rules, 2012. For specific activities, such as transportation of goods, the rules provided for ascertainment within a complex transaction set. 10. In re Advinus Therapeutics Ltd, the Tribunal had occasion to examine the applicability of rule 4 of Place of Provision of Service Rules, 2012 and it was held that 14. In this context, the legislative intent of incorporating a special and specific provision in Rule 4 may yield further insights. The special provision, which may be seen as an exception to the general Rule 3, deals with services in respect of goods as well as those provided to individuals. Not unnaturally, the services that require the physical presence of the person is taxed where the consumer receives the service and not at his location which as per Rule 2(i)(iv) would be his usual place of residence. In what can be considered as a most telling example of the scope of this portion of Rule 4, we could do a lot worse than refer to a decision of the Hon ble High Court of Delhi that, in the course of dealing with other, more weighty matters in Orient Crafts Ltd. v. Union of India [2006-TIOL-271-HC-DEL-ST = 2006 (4) STR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be taxable. This is in consonance with the privilege of exemption afforded to export of services. The special and distinct role of Rule 4 becomes clearer. in the context of goods having been worked upon which, though not similar to the present dispute, takes note of the objective of rule 4 of Place of Provision of Service Rules, 2012. That test of intent to preclude potential for escapement from tax does not have to be undertaken here owing to specific treatment afforded to transportation of goods in rule 10 of Place of Provision of Service Rules, 2012. 11. It would appear that there is no demand for the pre - negative list period and that it was only the inevitable passage of export goods through India at commencement of outward journey till loading on foreign going vessel/aircraft that was considered to be necessary and sufficient reason for invoking rule 4 of Place of Provision of Service Rules, 2012. In this implied convergence of rule 4 and rule 10 of Place of Provision of Service Rules, 2012, the transaction between M/s ATA Freightline Ltd, New York and M/s ATA Freightline (India) Pvt Ltd was split as one within India and one thereafter by appropriating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other than rule 3 of Place of Provision of Service Rules, 2004. Indeed, it was the visible absence of recipient at the port/airport of shipment that prompted the second contrivance of re-assigning a principal to principal transaction as principal to agent relation and, thereby, attempting to confer some legitimacy to deployment of rule 4 of Place of Provision of Service Rules, 2012 as it permits acceptance on behalf of provider ; that, even so, the conformity with a stray phrase does not obviate the necessity of fitment within the whole appears not to have troubled the adjudicating authority. The objective of separate treatment in rule 4 of Place of Provision of Service Rules, 2012 is not just about accepting responsibility for goods on behalf of provider of service as is evident from the proviso 4. Place of provision of performance based services.- The place of provision of following services shall be the location where the services are actually performed, namely:- (a) services provided in respect of goods that are required to be made physically available by the recipient of service to the provider of service, or to a person acting on behalf of the provider of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o responsibility for the actual transportation. It must be noted that in such cases the freight forwarder bears no liability with respect to transportation and any legal proceedings will have to be instituted by the exporters, against the airline/carrier/ ocean liner. The freight forwarder merely charges the rate prescribed by the airline/carrier/ocean liner and cannot vary it unless authorized by them. In such cases the freight forwarder may be considered to be an intermediary under rule 2(f) read with rule 9 of POPS since he is merely facilitating the provision of the service of transportation but not providing it on his own account. When the freight forwarder acts as an agent of an air line/carrier/ocean liner, the service of transportation is provided by the air line/carrier/ocean-liner and the freight forwarder is merely an agent and the service of the freight forwarder will be subjected to tax while the service of actual transportation will not be liable for service tax under Rule 10 of POPS. 2.2 The freight forwarders may also act as a principal who is providing the service of transportation of goods, where the destination is outside India. In such cases the freight forwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be identified as another other than the recipient outside the country, rendering of separate service is not demonstrated. 16. It is abundantly clear from SECTION 66C. Determination of place of provision of service.- (1) The Central Government may, having regard to the nature and description of various services, by rules made in this regard, determine the place where such services are provided or deemed to have been provided or agreed to be provided or deemed to have been agreed to be provided. (2) Any rule made under sub-section (1) shall not be invalid merely on the ground that either the service provider or the service receiver or both are located at a place being outside the taxable territory enacted to complement section 66B of Finance Act, 1994 which places emphasis on service provided or agreed to be provided in the taxable territory as the taxable event that the Rules so framed may encompass deeming of place of providing or agreed to be provided also. The general place of provision , viz. location of recipient of service, must first be established and it is only upon identification of recipient as not located inside India that the other provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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