Commissioner of Central Excise and Service Tax Vs Glaxo SmithKline Asia Pvt. Ltd. (CESTAT Chandigarh)
Conclusion: Services rendered by the respondents to M/s SB Plc, UK constitute export of service as the services were utilized by a company situated outside India and used outside India and the principal was located outside India with whom there was contract of service and such principal had paid for such services to the respondent in convertible foreign exchange.
Held: Respondent was engaged in providing “Business Support Services” and “Manpower Recruitment and Supply Services” to M/s. SB Plc, U.K. as per an agreement entered into between them. Revenue opinioned that the services rendered by respondents did not qualify as “export of services” in terms of Rule 3(1)(c) of Export of Service Rules, 2005, therefore, a show-cause notice was issued demanding service tax of Rs.51,92,481/- for the period January 2009 to September 2009 along with interest and penalty. Commissioner had dropped the proceedings initiated. Revenue was in appeal against the impugned order. Revenue following the Board’s Circular No.141/10/2011-TRU dated 13.05.2011; concluded that though the benefit of service had been accrued outside India, the noticee did not fulfil the condition of service that it must be “used outside India”. Respondent submitted that the Circular was clear that it would not operate in cases where the services were merely being provided from India and there was no conflict between the accrual of benefits and those used outside India; therefore, the reliance of the Department on the said Circular was misplaced. It was held that 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 respondent was like Business Auxiliary Service, the export of services was complete as the principal was located outside India with whom there was contract of service and such principal had paid for such services to the respondent in convertible foreign exchange, which was not disputed. It appeared that the respondents were rendering services with respect to clinical trials for the overseas company located in U.K. who undertake further research on the basis of the reports submitted by the respondent; therefore, it was not correct that the use of services was in India; it was evident that the services rendered by the respondents were used by the overseas company who were benefitted by the same. It was held that “the services rendered by the respondents to M/s SB Plc, UK constitute export of service as the services were utilized by a company situated outside India and used outside India. To that extent, Revenue had not made any case for intervening with the impugned order.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
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 was of the opinion 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. Learned 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.
2. Ms. Shivani, learned Authorized Representative for the Department, reiterates the grounds of appeal and submits that for a service to be provided by any party to be treated as “export of service”, the following three conditions must be satisfied:
(a) The recipient of the service is located outside India;
(b) The service is provided from India and used outside India;
(c) Payment is received in convertible foreign exchange.
In the instant case, condition (b) 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 13.05.20 11; 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”.
3. Learned Authorized Representative further submits that the noticee has not produced any credible evidence to the effect that the services have been actually used outside India; moreover, the payments have been to a third party. In respect of “Manpower Recruitment and Supply Service”, the respondents have assigned some of their employees to their overseas associates; however, these employees were working from the premises of the respondents only in India.
4. Ms. Krati Singh, learned Counsel for the respondents, submits that as per Rule 3 of Export Rules (during relevant period), the services rendered by the respondents fall under Category 3 Services; Rule 3(1)(iii) should be seen qua the person receiving the service but not the place of performance of service; Board’s Circular No.111/5/2009-ST dated 24.02.2009 clarifies that the phrase “used outside India” is interpreted to mean that the benefit of service should accrue outside India; the services rendered by the respondents are used by SB Plc, U.K. which are outside India; legislative intent is clear as the amendment to Rule 3, deleting services provided from India and used outside India, by Notification No.06/2010-ST dated 27.02.2010. She submits that the issue is no longer res integra in view of the following decisions:
