By TIOL News Service

MUMBAI, SEPT 25, 2018: THE appellant is providing services which are taxable under the category of Business Auxiliary Service.

As per agreement of M/s. Wilden California, M/s. Blue Star Ltd. and IIT Ind. Singapore and M/s. Yxlon, Humberg and M/s. Techcomp Ltd . and M/s. Solartron Mobrey Ltd., the assessee is operating as distributor for sales and after sales service of Hitachi Analytical product.

Initially, in respect of the said services provided, the appellant paid service tax but later realised that their services are covered by the Export of Services Rules, 2005.

Therefore, they claimed refund of the Service Tax paid of Rs.50.40 lakhs during the period August 2005 to July 2006.

The claims were rejected on the ground that the services rendered cannot be treated as exports.

The CESTAT allowed (with consequential relief) the assessee appeal by observing thus -

++ The appellant is a Distributor/agent of their foreign clients and procuring orders for supply of equipment by the foreign supplier. The appellant has no connection with the buyers in India. In fact he is identifying the buyers for the foreign clients, and the foreign clients are selling equipment to the Indian buyers, on principal to principal basis. We further find that as the equipment are having warranty and the foreign client have to provide certain services to Indian buyers and for providing that service, the appellants are providing service to Indian buyer on behalf of the foreign clients. In these circumstances, the recipient of the service is located outside India who used the services of the appellant to provide service to their buyers. A similar case came up before this Tribunal in Paul Merchants Ltd. - 2012-TIOL-1877-CESTAT-DEL wherein it is held that service provided by the Agents has to be treated as export of service. The Bombay High Court in SGS India P. Ltd. - 2014-TIOL-580-HC-MUM-ST also upheld the Tribunal decision - 2011-TIOL-666-CESTAT-MUM where a similar stand was taken.

++ In this case also, the appellant are providing the service of maintenance of equipment on behalf of their foreign clients to Indian buyers. They have provided the service on behalf of their foreign clients. We further find that during the warranty period, the repairs and maintenance service was to be provided by the foreign supplier and the appellant acted on behalf of the foreign supplier only .It is an admitted fact that the Indian buyer has not paid any amount towards the service provided by the appellant to the appellant during warranty period whereas the appellant who provided the service to Indian buyers has paid the service tax on maintenance service after the warranty period.

++ We have no hesitation to hold that as the appellant has provided the service of procuring purchase orders for their foreign clients and providing maintenance service to the Indian buyers during the warranty period on behalf of their foreign clients on the instructions of foreign clients, the same are covered by Rule 3(3) of Export of Services Rules,2005.

We reported this order as 2014-TIOL-2257-CESTAT-MUM.

Aggrieved, Revenue has filed an appeal before the High Court and urged the following two questions of law -

(a) Whether the services provided by the Respondent herein qualify as export of service under the provisions of Export of Services Rules, 2005?

(b) Whether the CESTAT is right in holding that the Respondent herein are entitled for refund when there is no application made under the prescribed format under the relevant provisions of law and without complying the procedural formalities prescribed under the law?

The High Court observed that an identical nature of service as rendered by the respondent to its foreign clients had come up for consideration [in ATE Enterprises - 2017-TIOL-1906-HC-MUM-ST and the Court had by following its earlier decision of SGS (supra) held that the service of procuring orders and passing it to overseas manufacturers/clients and receiving the payments for the same is an activity of export of service. Inasmuch as the question (a) does not give rise to any substantial question of law.

On the Revenue contention that the issue of unjust enrichment had not been considered by the Tribunal, the High Court observed that no ground to reject the refund application on ground of unjust enrichment was raised by the Revenue; that it was never the case of the Revenue that there was unjust enrichment on the part of the respondent assessee; that Revenue had, at no point of time, before the first authority or appellate authorities raised the issue of unjust enrichment and, therefore, the submission by the Revenue counsel was without any basis.

In fine, the Revenue appeal was dismissed.

(See 2018-TIOL-1976-HC-MUM-ST)