ST - Clients who were serviced were non-residents and so services rendered are export services - such service to foreign clients paying consideration in forex would not visit respondent with liability to pay ST: HC
By TIOL News Service
MUMBAI, FEB 27, 2015: THE CST, Mumbai had filed this appeal before the Bombay High Court against the CESTAT order.
The respondent is a registered service tax assessee and is also engaged in rendering taxable services as Steamer Agent to their overseas clients and receiving consideration in convertible foreign exchange. Such a service enjoyed exemption from payment of service tax in terms of exemption notification 6/1999-ST dated 19.04.1999. This exemption was withdrawn in public interest by notification 2/2003-ST dt. 01.03.2003.
Later, this exemption was apparently reinstated, again in public interest, by notification 21/2003-ST, dated 20.11.2003.
A SCN dated 25.02.2005 came to be issued to the respondent seeking Service Tax for the period 1st November, 2003 to 19th November, 2003 and penalties and interest.
If you wish to know why this abrupt period of 19 days, be informed that another proceeding was initiated seeking recovery of ST of Rs.18.55crores for the period from 01.10.2000 to 14.03.2005 and which excluded the period 01.03.2003 to 19.11.2003. [See - 2007-TIOL-885-CESTAT-MUM]. Perhaps, there is also another proceeding from March 2003 to October 2003 which we could not lay our hands upon.
The CST, Mumbai confirmed the demand and interest but dropped the penalty.
In appeal, the CESTAT set aside this order and allowed the appeal.
As mentioned, the Revenue is in appeal before the High Court and while adverting to the Board Circular 111/05/2009-ST dated 24.02.2009 emphasised that only those services would be treated as export, which are performed outside India. Inasmuch as in the present case, there is no dispute that the services have been rendered on Indian shores albeit the clients are residents abroad. It is further submitted that the Circular 56/5/2003-ST dated 25.4.2003 clarifying that export of service would continue to remain exempted even after rescission of notification 6/99-ST is of no avail to the respondent for it applies to only export of services. The Counsel for the Revenue also mentioned that since the decision of the Tribunal in the case of SGS India Pvt. Ltd. had been under challenge in the High Court, it could not be said that service tax cannot be demanded when Notification No.6 of 1999 had been withdrawn.
The High Court observed that a similar question had arisen and fallen for consideration in the case of Commissioner of Service Tax, Mumbai vs.SGS India Pvt Ltd. in Central Excise Appeal No.51/2012 before the High Court and which came to be decided on 23rd April, 2014 - 2014-TIOL-580-HC-MUM-ST.
After culling out the facts from the said case and the observations made in the said judgment and appearing at paragraphs 17, 20, 21, 22 & 24, the High Court held -
++ While deciding the matter against CST, Mumbai vs. SGS India Pvt Ltd. this Court has elaborately considered and found that the respondent assessee had rendered services to the clients abroad. Goods were tested by the respondent assessee in India. However, the report of the test and analysis was sent abroad. The clients of the respondent-assessee were foreign clients paying the respondent in convertible foreign exchange currency which is termed as export of service and this court had considered that rendition of such service to foreign clients paying consideration in convertible foreign exchange would not visit them with liability to pay service tax.
++ Undoubtedly, recipient of service is resident abroad and the consideration for the service is being paid in convertible foreign exchange from abroad. In the present case, it is indisputable position that the respondent-assessee was being allowed and had the benefit of exemption of service tax under Notification No.6/99 till it was rescinded on 1.3.2003. Also a circular had been issued clarifying that the service tax is not leviable on export of services. Subsequently exemption has been reinstated to the services wherein consideration was being received in convertible foreign exchange.
Holding that the Tribunal had properly considered the facts and that the clients who were serviced were residents abroad, and as such the services rendered to them being export services can hardly be amenable to any debate, the High Court held that the Tribunal decision cannot be faulted with.
The High Court concluded thus -
+ The observations reported in - 2014-TIOL-580-HC-MUM-ST aptly apply in the present case. The situation shows that the consideration by the Tribunal about service by the respondent assessee to a foreign recipient being outside the purview of the collection of service tax, can seldom be flawed, the question sought to be raised in the appeal as such stand answered accordingly.
The Revenue appeal was dismissed.
(See 2015-TIOL-516-HC-MUM-ST)
