These appeals are directed against the impugned order dated 19.09.2013 passed by Commissioner of Central Excise (Appeals), New Delhi.
2. Brief facts of the case are that the appellant is registered with the service tax Department for providing the services under the taxable category of “Management or Business Consultant Service” (MBCS), “Business Auxiliary Service” (BAS), etc. During the disputed period, the appellant entered into agreement with Quebec Inc., Canada, which is located outside India and is inter-alia, engaged in the business of providing investment advisory services in India to its respective clients in relation to companies in India. For providing the services, the appellant was receiving service fee in convertible foreign exchange. The appellant filed refund claim applications for the period from October 2009 to September 2010, claiming refund of cenvat credit lying un-utilized in its books of accounts. The refund applications were filed on the ground that it has used input services in providing the output service namely, MBCS, which were exported outside the country to its overseas clients. The refund claims were filed under Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 5/2006 C.E. (N.T.) dated 14.03.2006. The Department initiated show cause proceedings against the appellant, proposing to reject the refund claim of Rs. 5,27,189/-, on the ground that the appellant was engaged in rendering the service under the category of “Real Estate Advisory Service” (REAS). It has been alleged that the appellant rendered the service in respect of the properties situated in India and therefore, the services cannot be treated as export of service. The adjudicating authority had rejected the refund claim under Rule 5 of the Cenvat Credit Rules, holding that the services provided by the appellant are classifiable as REAS instead of MBCS, as claimed by the appellant and therefore, the benefit under the Export of Services Rules, 2005 cannot be granted. By the impugned order, the ld. Commissioner (Appeals) has rejected the appeals filed by the appellant and upheld the adjudication order.
3. Heard both sides and perused the records.
4. The issue involved in these appeals for consideration by the Tribunal is, as to whether, the activities of the appellant would come within the purview of MBCS and BAS, as claimed by the appellant; or under the category of REAS, as held by the lower authorities and that whether, the appellant should be entitled to the refund benefit under Rules 5 of the Cenvat Rules, 2004 read with Export of Services Rules, 2005. For the purpose of proper appreciation of the case, the relevant statutory definitions of “REAS” and “MBCS” contained in the Finance Act, 1994 are reproduced below:-
Section 65(88): “real estate agent” means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant;
Section 65(89): “real estate consultant” means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate;
Section 65(65): “”management or business consultant” means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organisation or business in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management.
6. For ascertaining the nature of services provided by the appellant and their classification under appropriate taxable category, it is required to discuss the contents of the agreement entered into between the appellant and the overseas client M/s.Quebec. The relevant clause in the contract is extracted herein below:-
SCOPE OF SERVICES
CDPREAL will provide advisory services to the Client in connection with the Client‟s investments in companies developing real estate projects. In particular such services will include identifying investment opportunities, analysing and advising on the real estate markets, providing financial analysis/update on the investment opportunities identified, assistance for conducting due diligence, identifying opportunities to exit the Companies etc.
Further, CDPREAL will assist the Client for providing reporting services in relation to the Client‟s existing and future investments in Companies developing real estate projects. In particular, such services will include review an reporting on the following aspects:
7. On close reading of the scope of the agreement referred above, we find that the appellant’s task was mainly confined to providing of advisory services in respect of investments identified by overseas client and advise it with respect of investment opportunities in the companies, who are engaged in developing the real estate projects.
8. The definition of MBCS includes the service of any person, who renders any advice, consultancy or technical assistance in relation to financial management. The contention of the ld. Counsel for the appellant is that the investment as mentioned in the agreement would be only in respect of the companies, engaged in the business of real estate and not for investment in real estate. He further submitted that the consideration received by the appellant were for the advise and are not linked to any acquisition of any real estate. Hence, it is contended that the appellant had rendered the services under the category of MBCS.
9. The lower appellate authority observed that the appellant was in fact, assisting its foreign client for making investment in the Indian real estate companies and therefore, such service is confirming to the definition of “REAS”. Further, it has also been observed that the services were consumed in India and as such, the benefit of Export of service should not be available to the appellant. The lower authorities also observed that the appellant is engaged in rendering the service to the foreign client in relation to evaluation of real estate. After going through the agreement, we are of the view that the appellant rendered the services to the overseas client as advisor of the investment opportunities in Indian company, which is clearly covered within the definition of MBCS. We agree with the submissions of the ld. Counsel that by investing in a company in real estate sector, the investor does not acquire or purchase the real estate property itself. In this context, we find that the Tribunal in the case of AMP Capital Advisors India Pvt. Ltd. Vs. CST, Mumbai – 2015-TIOL-1001-CESTAT-MUM, observed that the appellant providing advisory services to AMP capital, Australia and the service recipient using said advice received for further advising for their customers in India, would qualify for export of service. The relevant paragraphs of such decision are reproduced below:-
“6. I have carefully considered the submissions made by both the sides. The issue to be decided by me in this case is whether the services provided by the appellant, M/s. AMP India Capital Advisors (India) Pvt. Ltd. to M/s. AMP Capital (Australia) is „export of service‟ or otherwise and consequently eligibility to refund. As per the facts, the appellant is providing management consultancy services such as providing reports of information on investment area, industries, companies, non-binding advisory service in respect of potential investment and investment opportunities in India, the research analysis and identification of investment opportunities providing necessary reports, information and feedback in connection with the performance of investment in India and other non- binding advisory service to M/s. AMP Capital (Australia) which is located in Australia. It is undisputed that the appellant is receiving the remittance in convertible foreign exchange towards fees of their services. The services, though related to the analysis carried out in India, but the services are provided to Australia based firm M/s. AMP Capital (Australia). These services are not provided to any person located in India and nobody in India is concerned about the services. Since the services are provided to Australia based firm it is that firm, M/s. AMP Capital (Australia) who is the sole recipient of‟ the services and on the basis of these services, M/s. AMP Capital (Australia) is further providing services to the foreign based companies. That shows, that the services provided by the appellant are consumed by M/s. AMP Capital (Australia), Australia for providing his output services to foreign based companies. Under these facts there is no dispute that the services provided by the appellant are indeed used and consumed by M/s. AMP Capital (Australia) in Australia. Therefore, the services are used outside India.
6.1 On the identical set of facts, this Tribunal in the following cases have held as under :
(i) In the case of Amha Research (India) Pvt. Ltd.:
“3. On going through the records and after considering the submissions of both sides, we find that in this case, the appellant is a subsidiary of M/s. Amba Holdings Inc. The refund claim has been denied on the ground that the services have been entirely utilized in India. According to the agreements, we find that the buyer namely M/s. Amba Holdings Inc. is engaged in the business of providing services in investment research, outsourcing of financial analysis and sub-contracting services. It was the submission of the learned Consultant that the services provided by the appellant in the form of studies and submission of reports which are in turn provided by the Amba Holdings Inc. to their customers abroad. It is not the case where the benefits of research are used by the buyer in India as assumed by the lower authorities.
4. On going through the impugned order, we find that there is absolutely no evidence for the conclusions reached by the lower authorities that investment and research services have been used in India only. The learned Commissioner has simply stated that on going through the agreement this is what he finds. He has not quoted paragraph of the agreement which is relevant and where exactly it emerges from the agreement that services are lo be used in India. Moreover, as per Circular, issued by the Board in 2009 and considered in the Interim Order (supra), if the beneficiary is located outside, refund is admissible. It is not the case of the Revenue that consideration has not been received in foreign currency. We also find that this Tribunal in the case of CST, Mumbai v. M/s. Greater Pacific Capital Pvt. Ltd. [2014-TIOL-1726- CESTA T-Mum] in similar circumstances came to the conclusion that refund is admissible. Accordingly, we consider that the appellant has made out a case for eligibility for refund. Therefore appeal is allowed with consequential relief to the appellant.”
(ii) Commissioner of Service Tax, Mumbai v. Greater Pacific Capital Pvt. Ltd.
“9 . In this case the issue is to be decided whether the services provided by the respondent to GPC located outside India qualifies as export of service as per Rule 3(1)(iii) read with Rule 4 of the Export of Services Rules, 2005 or not and consequently, whether the respondent is entitled for refund claim or not.
10. It is an admitted fact that the respondent has provided investment advisory service to GPC Management located outside India and does not have any business in India. It is also not in dispute the respondent has received the payment in convertible foreign exchange. Therefore, as per Rule 3 (l) (iii) of the above said Rule, the services provided by the respondent not qualifies as export of service as the service provided by the respondent to a service recipient located outside India and are to be used outside India for their benefit. Further, I find that the issue came up before this Tribunal in the case of Paul Merchants Ltd. (supra) and in that case also this Tribunal has held that if the services recipient is located outside India and the same has been utilized outride India, therefore it is a case of export of service. Further in the case of Vodafone Essar Cellular Ltd. – 2013 (31) S.T.R. 738 this Tribunal held that telecom services provided to inbound roaming international consumers would qualify as export of service. In the said case, Vodafone provided telecom services in India to international in-bound roamers registered with foreign telecom network operators but located in India at the time of providing of the said services. In that case this Tribunal held that Vodafone rendered the telecom service, in the context of international roaming, the benefit accrued to the foreign telecom service provider, though the actual consumer was in India but in that case it was held that it is a support service. In the instant case, the respondent has provided investment advisory services to GPC who is located outside India and having no office in India. In that case it is held that it is a case of export of service. In the circumstance, the respondent is entitled for the refund claim. Accordingly, I do not find any infirmity with the impugned order and the same is upheld. As the appeals filed by the Revenue Reserves no merit are therefore, dismissed. Stay application is also disposed of in the above terms.”
6.2 In view of the above judgments it is found that the services were carried out in India but the recipient is outside India and, therefore, the services provided by Indian entity deemed to be used by the person located outside India and, therefore, it satisfies the terms used “outside India” as provided under the Export of Service Rules. Therefore, following the ratio of the above judgments it is absolutely undisputed that the appellant has provided the services from India and the same was used outside India. Accordingly it qualifies as „export of services‟ and refund is admissible.”
10. In view of the above discussion and analysis of the judicial pronouncements, we are of the considered opinion that the activities rendered by the appellant would come within the purview of “MBCS” and the appellant is entitled for the refund benefit. Therefore, by setting aside the impugned order, we allow the appeals in favour of the appellant.
[Pronounced in the open Court on 26.03.2018]