Kaytee Corporation Pvt. Ltd vs Commissioner Of Service Tax, Mumbai-I

(Arising out of Order-in-Appeal No. 188 (F.No. V.2(A)STC/42/2011) dated 22.5.2013 passed by Commissioner of Central Excise & Service Tax (Appeals-IV), Mumbai-I)

For approval and signature:

Honble Mr. Ramesh Nair, Member (Judicial) ======================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :

CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Kaytee Corporation Pvt. Ltd. Appellant Vs. Commissioner of Service Tax, Mumbai-I Respondent

Appearance: None for appellant Shri Sanjeev Nair, Examiner (AR), for respondent

CORAM: Honble Mr. Ramesh Nair, Member (Judicial)

Date of Hearing: 17.4.2015 Date of Decision: 17.4.2015

ORDER NO

The appeal is directed against order-in-appeal No. 188 (F.No. V.2(A)STC/42/2011) dated 22.5.2013 passed by Commissioner of Central Excise & Service Tax (Appeals-IV), Mumbai-I, wherein he upheld the order-in-original and rejected the appeal filed by the appellant.

2. The fact of the case is that the appellant is engaged in the business of export of goods. They filed four refund claims for an amount of Rs.16,30,990/- on account of service tax paid on commission amount paid by them to the commission agent situated abroad under the reverse charge mechanism for export of goods during the financial year 2004-05, 2005-06, 2006-07 and 2007-08. The refund was filed on the ground that the services of overseas commission agent were provided from India and were also received/consumed outside India. Therefore, the provisions of Taxation of Services (Provided from Outside India and received in India) Rules, 2006, read with the provisions of Section 66A of the Finance Act, 2006, did not apply in their case and, therefore, the refund claim was filed in respect of service tax paid by them under a mistake of law. The original authority sanctioned the claim of rs.7,96,973/- under Section 11B of the Central Excise Act, 1944 and rejected the balance claim amounting to Rs.8,34,017/- by holding that the appellant had rightly paid the service tax. Aggrieved by the partial rejection of refund claim, the appellant approached the Commissioner (Appeals) with an appeal which was rejected and the order-in-original was upheld. Therefore, the appellant is before me.

3. When the matter was called for hearing, neither anybody appeared nor any adjournment request on behalf of the appellant. I, therefore, take up the matter for disposal on merits.

4. Shri Sanjeev Nair, learned Examiner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. He further submits that as per Rule 3(iii) of Taxation of Services (Provided from outside India and Received in India) Rules, 2006, the service under question is such a service which is received by a recipient located in India for use in relation to business or commerce. Therefore, Section 66A is clearly applicable in case of the present service i.e. commission agent service provided by the overseas agent from outside India and received in India by the appellant.

5. I have carefully considered the submissions made by the learned AR and also perused the records. The small issue in the appeal to be decided is whether the lower authorities are correct in holding that the commission agent service received by the appellant is covered under Section 66A for discharging the service tax liability by the recipient on reverse charge basis. The service involved is a commission agent service which is provided by an overseas agent located outside India for promotion of export business of the appellant. The service is indeed received by the appellant only and nobody else. The service of commission agent is received in India and subsequently on the basis of that service, the goods are exported to foreign countries. With this fact, it is clear that the service is provided from outside India and received by the appellant in India. The relevant portion of Taxation of Services (Provided from outside India and Received in India) Rules, 2006 is reproduced below:-

Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.

In exercise of the powers conferred by sections 93 and 94, read with section 66A of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:-

1. Short title and commencement. (1) These rules may be called the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. Definitions. In these rules, unless the context otherwise requires

(a) Act means the Finance Act, 1994 (32 of 1994);

(b) input shall have the meaning assigned to it in clause (k) of rule 2 of the CENVAT Credit Rules, 2004;

(c) input service shall have the meaning assigned to it in clause (l) of rule 2 of the CENVAT Credit Rules, 2004;

(d) output service shall have the meaning assigned to it in clause (p) of rule 2 of the CENVAT Credit Rules, 2004;

(e) 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;

(f) words and expressions used in these rules and not defined, but defined in the Act shall have the meanings respectively assigned to them in the Act.

3. Taxable services provided from outside India and received in India. Subject to section 66A of the Act, the taxable services provided from outside India and received in India shall, in relation to taxable services

(i) specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), (zzzh), (zzzr), [(zzzy), (zzzz) and (zzzza)]1 of clause (105) of section 65 of the Act, be such services as are provided or to be provided in relation to an immovable property situated in India;

specified in sub-clauses (a), (f), (h),(i), (j), (l), (m), (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf), and (zzzp) of clause (105) of section 65 of the Act, be such services as are performed in India:

Provided that where such taxable service is partly performed in India, it shall be treated as performed in India and the value of such taxable service shall be determined under section 67 of the Act and the rules made thereunder;

specified in clause (105) of section 65 of the Act, but excluding

(a) sub-clauses (zzzo) and (zzzv);

(b) those specified in clause (i) of this rule except when the provision of taxable services specified in clauses (d), (zzzc), and (zzzr) does not relate to immovable property; and

(c) those specified in clause (ii) of this rule, be such services as are received by a recipient located in India for use in relation to business or commerce.

(ii) specified in sub-clauses (a), (f), (h), (i), (j), (l), (m), (n), (o), (s), (t), (u), (w), (x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc), (zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv), (zzw), (zzx), (zzy), (zzzd), (zzze), [(zzzf), (zzzp), (zzzzg), (zzzzh) and (zzzzi)]3of clause (105) of section 65 of the Act, be such services as are performed in India :

Provided that where such taxable service is partly performed in India, it shall be treated as performed in India and the value of such taxable service shall be determined under section 67 of the Act and the rules made thereunder;

?[ Provided further that where the taxable services referred to in sub-clauses (zzg), (zzh) and (zzi) of clause (105) of section 65 of the Act, are provided in relation to any goods or material or any immovable property, as the case may be, situated in India at the time of provision of service, through internet or an electronic network including a computer network or any other means, then such taxable service, whether or not performed in India, shall be treated as the taxable service performed in India; ]2

(iii) specified in clause (105) of section 65 of the Act, but excluding, 

a) sub-clauses (zzzo) and (zzzv);

(b) those specified in clause (i) of this rule except when the provision of taxable services specified in clauses (d), (zzzc), and (zzzr) does not relate to immovable property; and

(c) those specified in clause (ii) of this rule, be such services as are received by a recipient located in India for use in relation to business or commerce.

[ Provided that where the taxable service referred to in sub-clause (zzzzj) of clause (105) of section 65 of the Act is received by a recipient located in India, then such taxable service shall be treated as taxable service provided from outside India and received in India subject to the condition that the tangible goods supplied for use are located in India during the period of use of such tangible goods by such recipient. ]4

4. Registration and payment of service tax. The recipient of taxable services provided from outside India and received in India shall make an application for registration and for this purpose, the provisions of section 69 of the Act and the rules made thereunder shall apply.

5. Taxable services not to be treated as output services. The taxable services provided from outside India and received in India shall not be treated as output services for the purpose of availing credit of duty of excise paid on any input or service tax paid on any input services under CENVAT Credit Rules, 2004.

6. From the above Rule 3(iii)(c), it is clear that the service of overseas agent received by the appellant has been provided from outside India and received by the appellant who is a recipient located in India and the service is used in relation to business or commerce i.e. export business. Therefore, in view of this undisputed position, Section 66A is clearly applicable and according to which the appellant was legally liable for payment of service tax for the period from 19.4.2006. In view of this, the lower authorities have correctly held that the service tax was payable after 19.4.2006 and rightly rejected the refund claim in respect of such service tax paid for the period on or after 19.4.2006. I am, therefore, fully in agreement with the findings of the lower authorities.

7. The impugned order is upheld and the appeal filed by the appellant is rejected.

(Operative part pronounced in Court)

(Ramesh Nair) Member (Judicial)

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