Service Tax Tribunal rules in favour of tax refund

Service Tax Tribunal rules in favour of tax refund

CESTAT directs that company providing services on foreign shores to be considered as 'export of service'

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad, has ruled that a company providing service to its holding company, on its own account will be considered 'Export of Service'. Since the holding company happens to be situated outside India, the tax paid erroneously by it is wholly refundable.

It held that a subsidiary and its parent company located in different taxable territories are totally distinct taxpayers/different entities.

Allowing the appeal, judicial member, Anil Choudhary accepted the submission that the appellant provided services on their own account, which included assisting the recipient of services, located outside India, in the matter of quality control, market research, management and business consultancy.

The Service Rules, 2012, clearly states that an intermediary (procurer/agent) does not include a person who provides the main service or supply of goods on his account, the tribunal held.

The appellant, CHF Industries India was a wholly-owned subsidiary of CHF International Limited, Hong Kong. During 2015-2016, the appellant provided services in the nature of "assistance in procurement of goods" by the parent company in Hong Kong, directly from third parties in India.

For the services provided, the appellant raised an invoice for reimbursement of expenses, without charging any service tax. The appellant in convertible foreign exchange received payment for the same and it erroneously paid service tax.

On realizing the error, it subsequently, filed revised returns and the entire amount received in convertible foreign exchange was claimed exempt, against "Export of Services."

In 2017, the appellant filed separate refund claims whereupon two show-cause notices were issued for the rejection of refund claims, as the appellant had provided services of "Intermediary or Agent" to its foreign client, which was covered under the Provision of Services Rules, 2012. Hence the services provided by the appellant were not export of services.