Service Utilized by a company situated outside India falls under Export Service under Export Service Rule: CESTAT [Read Order]

The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that the service utilized by a company situated outside India falls under export service under the Export of Service Rule, 2005.

M/s Glaxo SmithKline Asia Private Limited, the respondents, are engaged in providing “Business Support Services” and “Manpower Recruitment and Supply Services” to M/s SmithKline Beecham Plc. (SB Plc), U.K. as per an Agreement entered into between them.

Revenue opinioned that the services rendered by the respondents do not qualify as “export of services” in terms of Rule 3(1)(c) of Export of Service Rules, 2005; a show-cause notice dated 15.04.2010 was issued demanding service tax of Rs.51,92,481/- for the period January 2009 to September 2009 along with interest and penalty. The Commissioner of Central Excise, New Delhi has dropped the proceedings initiated. On a review by the Committee of Chief Commissioners, Revenue is in appeal against the impugned order. 

Ms. Shivani, Authorized Representative for the Department, reiterated the grounds of appeal and submitted that for a service to be provided by any party to be treated as an “export of service”, the three conditions must be satisfied, ies, the recipient of the service is located outside India, the service is provided from India and used outside India and the Payment is received in convertible foreign exchange.

It was observed that the second condition is not satisfied as the service is not used outside India. The issue stands clarified by Board’s Circular No.141/10/2011-TRU dated 13.05.2011; though the benefit of service has been accrued outside India, the noticee did not fulfil the condition of service that it must be “used outside India”.

The respondent submitted that the Circular is clear that it will not operate in cases where the services are merely being provided from India and there is no conflict between the accrual of benefits and those used outside India; therefore, the reliance of the Department on the said Circular is misplaced.

As per the requirement of Export of Services Rules, 2005 read with the explanatory Circular No. 111/05/2009-S.T., as the services provided by the appellant are like Business Auxiliary Service, the export of services is complete as the principal is located outside India with whom there is contract of service and such principal have paid for such services to the appellant in convertible foreign exchange, which is not disputed.

In view of the facts and circumstances of the case and the judgments of the Tribunal, the two-member bench of Mr S S Garg, Member (Judicial) and  Mr P Anjani Kumar, Member (Technical) held that “the services rendered by the respondents to M/s SB Plc, UK constitute export of service as the services are utilized by a company situated outside India and used outside India. To that extent, we find that the Department has not made any case for intervening with the impugned order. We find that the impugned order is proper and legally sustainable. Accordingly, we dismiss the appeal filed by the Department.” 

To Read the full text of the Order CLICK HERE

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