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TMI Blog2008 (11) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... uters (India). The denial of the refund is on the ground that the payment for services rendered by the appellant was not received in convertible foreign exchange. According to the Revenue, unless the payment for services rendered is in convertible foreign exchange, the appellants would not be entitled for the refund in terms of Rule 5 of Cenvat Credit Rules read with Notification 5/2006-CE (NT) as well as Rule 5 of Export of Service Rules, 2005. 5. Shri Shiva Dass explained that the appellants rendered services to parties situated outside India. On this point, there is no dispute. All these parties were sponsored by Satyam (India). In other words, the contention of the learned Advocate is that Satyam (India) is the agent of the appellant as far as procuring the foreign clients is concerned. With regard to the receipt for the services rendered, it was explained that the appellant raises the invoice in US Dollars to Satyam. In turn Satyam raises the invoice to the foreign party. The foreign party makes the payment in US Dollars. However after deducting their commission of 5% M/s. Satyam makes the payment to the appellant in Indian Rupees. Shri Shiva Dass contended that in these circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to commerce or industry b) The recipient, as could be seen from the work orders, does not have any commercial or industrial establishment or any office relating thereto in India c) The orders were placed from USA/Australia/other foreign country and they were executed directly by Nipuna either as "onsite" overseas activity or delivered to the overseas party located outside India. There was no interaction in relation to these work orders with any office in India or any commercial or industrial establishment in India. 6.4 An amendment was carried out to the EOS Rules by Notification No. 26/2005-ST dated 07.06.2005. This did not affect the position of the appellants. 7. Rule 3 (3) of the EOSR was substituted with effect from 19.04.2006, which prescribed conditions under Rule 3 (1) and 3 (2). The rules did not provide that one has to satisfy conditions prescribed under Rule 3 (1) as well as those prescribed under Rule 3 (2). Therefore, even if a person satisfies the conditions given under Rule 3 (1) or Rule 3 (2), then the service provided by him will qualify as an export of service. Both the sub-rules provide for separate set of conditions to qualify for export of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement which clearly shows that Satyam is working for promoting the business of appellants only and not as a principal. In the present case, Satyam has procured orders as an agent against commission and which have been executed by Nipuna. In consideration of the services rendered by the appellant, Satyam, as an agent, has received the payment on behalf of the appellant from the service receiver and in return Satyam has received commission for his agency services from the appellant. (Clause 3 of the Alliance agreement). Similar to Agency contract, the entire responsibility for the execution of the contract is upon the appellant as evidenced from Clause 8 of the Alliance agreement. The very fact that the Department has granted refund in those cases where the export of services has taken place to customers directly but invoice in foreign currency was raised on Satyam and Satyam has paid in foreign exchange indicates that the tripartite agreement between the appellants, Satyam and the customers is recognized by the Department. 10. The learned JCDR while reiterating the impugned order, invited our attention to the procedure devised by the Central Government for refund of cenvat credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see if the contention of the appellant is sustainable. 13. The Export of Services Rules, 2005 was notified by Notification No. 9/2005-ST dated 03.03.2005. It was effective from 15.03.2005. The main rule is Rule 3. For clarity we are reproducing the said Rule as notified on 03.03.2005. 3. Export of taxable service. - The export of taxable service shall mean, - (1) in relation to taxable services specified in sub-clauses (d), (p), (q). (v) and (zzq) of clause (105) of Section 65 of the Act, such taxable services as are provided in relation to an immovable property which is situated outside India; (2) in relation to taxable services specified in sub-clauses (a), (f), (h), (i), (j). (l), (m), (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zi), (zj), (zn), (zo), (zq), (Zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzj), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx) and (zzy) of clause (105) of Section 65 of the Act, such services as are performed outside India: Provided that if such a taxable service is partly performed outside India, it shall be considered to have been performed outside India; (3) in relation to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give a precise definition of export of services. However, Rule 3 reproduced above, attempts to categorize the taxable services into three categories. We can observe that there is Rule 3 (1) we have 3(2) we have 3(3). Why such categorization? 13.2 A careful reading would reveal that Rule 3(1) relates to certain taxable services provided in relation to an immovable property situated outside India. The said services are specifically mentioned in the said Rule. For e. g. Insurance cover is given to immovable property. When the said immovable property is situated abroad, the insurance service provided to such property amounts to export of insurance service. Similar is the case with regard to the other services mentioned in Rule 3 (1). Suffice to say that the services mentioned in Rule 3(1) relate to immovable property situated abroad. 13.3 Rule 3 (2) indicates various services. When the services are performed outside India, they would be considered as Export of Services. In certain cases, a service may be partly performed in India and partly abroad, in such case also, the services would deemed to have been exported. Rule 3(2) enumerates various services. A careful scrutiny would reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no requirement for the appellant to receive payment in foreign exchange. 13.5 Now, we have to understand how far the position as per the above rules got modified subsequently due to further amendments. Summing up, as far as the Export of Service Rules 2005 is concerned, only in respect of services relating to 3 (3) (ii) (i), where the recipient has office in India, the requirement of payment in convertible foreign exchange is a must to deem such services as Export of Services. In other words, as long as the services specified in 3 (3) are provided in relation to commerce and industry and recipient of such services is located outside India and the service recipient has no specified establishment in India, the appellant would be covered to qualify for the benefits available to export of services. 14. Now, we have to understand the implications of an amendment vide Notification No. 28/2005-ST dated 07.06.2005. For clarity the said amendment is reproduced below: 1. (1) These rules may be called the Export of Services (Amendment) Rules, 2005. (2) They shall come into force on the 16th day of June, 2005. In the Export of Services Rules, 2005, in Rule 3, - 2. (i) in sub-rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted to deem such services as export of service. It is very clear that the services rendered by the appellants would not come under Rule 3 (1) and Rule 3 (2) of EOSR, 2005. Consequently, the condition with regard to the receipt of payment in convertible foreign exchange would continue to inapplicable. We mentioned that there was some change in sub rule (3) but that change is not relevant for us. Thus, it can be seen the Government has deliberately not amended Rule 3 (3) while amending Rule 3 (2) and 3 (1) providing for receipt of payment in convertible foreign exchange to deem the services relating to said rule as export of service. The conclusion is that Notification 28/2005-ST dated 07.06.2005 has not changed the position with regard to the services rendered by the appellant from what was obtaining in terms of Notification No. 9/2005-ST dated 03.03.2005. 15. Now we have to understand the effect of amendment by Notification No. 13/2006-ST dated 19.04.2006 for clarity we are reproducing the said amendment in toto. In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Exclusive Economic Zone of India as declared by the notifications of the Government of India in the Ministry of External Affairs numbers S.O. 429 (E), dated the 18th July, 1986 and S.O. 643 (E), dated the 19th September, 1996." 15.1 The above amendment has brought about important changes. When the Export of Service Rule 2005 were introduced the services were categorized under Rule 3 (1), 3 (2), 3 (3). The amendment of 13/06 has changed this position. After the amendment, Sub-Rules 3 (1) (i) and 3 (1) (ii) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia in the Ministry of External Affairs numbers S.O. 429 (E), dated the 18th July, 1986 and S.O. 643 (E), dated the 19th September, 1996.' 17.1 A scrutiny of the above amendment reveals that the condition enumerated in sub-rule 2 are applicable to the services mentioned in sub rule 1. This notification is effective from 01.03.2007. In other words, all the services 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 01.03.2007. As the period involved in the present case is prior to 01.03.2007, the appellant is not hit by the said condition. Legally they are entitled for the refund in terms of the existing rule. 18. When we examine the factual situation, it is seen that the appellant has directly rendered the services to the recipients abroad. This is an undisputed fact. The payment for the services rendered has also been made in foreign currency. Revenue is denying the refund for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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