Whitefish Exports vs Mumbai Ii

[Arising out of Order-in-Appeal No. YDB/267/M-II/2010 dated 28/05/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone  II.]

For approval and signature:

Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical)

1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? : No 2. Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? : Yes 3. Whether Their Lordships wish to see the fair copy of the Order? : Seen 4. Whether Order is to be circulated to the Departmental authorities? : Yes

APPEAL NO: ST/460/2010

Whitefish Exports

Appellant vs

Commissioner of Service Tax

Mumbai  II

Respondent

APPEAL NO: ST/79/2011

Commissioner of Service Tax

Mumbai  I

Appellant vs

Whitefish Exports

Respondent

Appearance:

Ms. Aparna Hirandagi, Advocate for the assessee-appellant Shr B. Kumar Iyer, Superintendent (AR) for Revenue

CORAM:

Honble Shri M V Ravindran, Member (Judicial) Honble Shri C J Mathew, Member (Technical)

Date of hearing: 29/07/2015 Date of decision: 29/07/2015

ORDER NO: ____________________________

Per: M V Ravindran:

These two appeals are filed by the assesse as well as Revenue against Order-in-Appeal No. YDB/267/M-II/2010 dated 28/05/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone  II.

2. Revenue is in appeal against the said order on the ground that the lower authorities have reduced the penalty imposed under Section 78 while the assesse is in appeal against the entire order which has confirmed the demands raised against them under the category of Business Auxiliary Service.

3. Heard both the sides and perused the records. The issue involved in this case is that the appellant-assessee has been providing services to overseas principles in connection with the procurement of seafood from India in the capacity of a buying agent and received commission from such overseas principles. Revenue authorities were of the view that such services are covered under Business Auxiliary Services and the appellant-assessee has not discharged service tax liability on the same. A show cause notice was issued and the appellant-assessee contested the show cause notice on merits claiming that the services which are rendered by them would fall under the category of export of service. The adjudicating authority did not agree that the contention raised and confirmed the demand of service tax with interest and imposed penalties. On an appeal, the first appellate authority agreed with the views of the adjudicating authority but reduced the penalties imposed.

4. After considering the submissions made by both the sides we find that the issue is now squarely covered by the various decisions of the Tribunal. In the case in hand, it is undisputed that the services are rendered by the appellant-assessee for locating the sources of sea food for their overseas principles. There is no dispute as to the usage of the services is in relation to the commerce or industry i.e., export of sea foods. The foreign buyers who were paying a commission to the appellant-assessee for the services rendered by them.

5. We find that this Tribunal in the case of Paul Merchants Ltd. 2013 (29) STR 257 at paragraph No. 73 and 76 held as under:

73. In view of my? finding that the recipient of the services provided by sub-agents appointed by the agents of WU is WU and the services provided by the sub-agents are being exported and hence are not liable to be taxed, the question regarding eligibility of the sub-agents for small scale exemption under Notification No. 6/2005-S.T. is irrelevant. Therefore, I am not going into the same.

74. .

75. .

76. In view of the? above discussion, the points of difference, mentioned in Para 60 are answered as under :-

(i) The term export has not been defined either in Article 286(1)(b) or in any of the article of the Constitution of India. Though the Apex Courts judgments in the case of the State of Kerala v. The Cochin Coal Company Ltd. [(1961) 2 STC 1 SC] and Burmah Shell Oil Storage & Distribution Co. of India v. Commercial Tax Officer & Others reported in (1960) 11 STC 764 (SC) explain the meaning of the term export, the ratio of these judgments which are with regard to export of goods, is not relevant for determining what constitutes the export of services. There is no question of Export of Services Rules, 2005, being in conflict with Article 286(1)(b) of the Constitution of India.

(ii) The principle of equivalence between the taxation of goods and taxation of service had been laid down by the Apex Court in the case of Association of Leasing & Financial Service Companies v. Union of India (supra) and All India Federation of Tax Practitioners v. Union of India (supra) in the context of constitutional validity of levy of Service Tax on certain services. This principle does not imply that Service Tax should be levied and collected in exactly the same manner as the levy and collection of tax on goods or that export of service should be understood in exactly the same manner in which the export of goods is understood. In fact the question as to what constitutes the export or import of service was neither raised nor discussed in the above-mentioned judgments of the Apex Court. As discussed in this order, the Export of Services Rules, 2005 are in accordance with the Apex Courts ruling in the above-mentioned judgments that Service Tax is a value added tax, which in turn is a destination based consumption tax in the sense that it is levied on commercial activities, and it is not a charge on the business but a charge on the consumers. There is nothing in Export of Services Rules, 2005 which can be said to be contrary to the principle that a service not consumed in India is not be taxed in India.

(iii) What constitutes export of service is to be determined strictly with reference to the provisions of Export of Services Rules, 2005. Not doing so and leaving this question to be determined by individual tax payers or tax collectors for each service, based on their deductive ability would result only in total confusion and chaos.

(iv) Money transfer service is being provided by the Western Union from abroad to their clients who approached their offices or the offices of their agents for remitting money from to friends/relatives in India. The service being provided by the agents and sub-agents is delivery of money to the intended beneficiaries of the customers of WU abroad and this service is business auxiliary service, being provided to Western Union. It is Western Union who is the recipient and consumer of this service provided by their agents and sub-agents, not the persons, receiving money in India.

(v) The consumer of the service provided by the agents and sub-agents of WU in India is the Western Union, located abroad, who use this service for their money transfer business not the persons receiving money in India. Since the service provided is Business Auxiliary Service classifiable under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 2005, and has been provided in relation to business of Western Union located abroad, has been received and used abroad, and the payment for the service has been received in India in convertible foreign currency, the same has to be treated as export of service. It is the person who requested for the service, is liable to make payment for the same and whose need is satisfied by the provision of service, who has to be treated as recipient of the service, not the person or persons affected by the performance of the service. Thus, when the person on whose instructions the services in question had been provided by the agents/sub-agents in India, who is liable to make payment for these services and who used the service for his business, is located abroad, the destination of the services, in question, has to be treated abroad. The destination has to be decided on the basis of the place of consumption, not the place of performance of service.

(vi) Reimbursement of advertisement and sales promotion activities received from WU is not taxable as the same are for the services provided to WU, which are export of service.

(vii) The question of time-bar is not relevant when the main question has been answered in favour of the agents & sub-agents.

(viii)& (ix)?These questions are no longer relevant when the main question has been answered in favour of the agents and sub-agents.

(x) When the services provided by the sub-agents have been held to be export of service and hence not liable for Service Tax, the question of their eligibility for exemption under Notification No. 6/2005-S.T. is irrelevant and has not been gone into.

(xi) The services provided by the agents and sub-agents throughout during the period of dispute are classifiable as Business Auxiliary Service under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994 and the same have been exported in terms of the provisions of Rule 3(1)(iii) read with Rule 3(2) of the Export of Services Rules, 2005 and hence no Service Tax is payable.

(xii) There is no need to remand the cases of sub-agents. The same must be decided on the basis of the majority opinion.

6. It may be noted from the above reproduced paragraphs that the issue is no more res integra and would cover in favour of the appellant-assessee. Accordingly, we are of the view that the appellant-assessee has made out a case and the appeal filed needs to be allowed.

7. Since the appellant-assessees appeal is allowed in toto, the revenues appeal for enhancement of penalty will not survive.

8. The impugned order is set aside and the assessees appeal is allowed while revenues appeal is rejected.

(Pronounced in Court) (C J Mathew) Member (Technical) (M V Ravindran) Member (Judicial)

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