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September 2015

[2015-TIOL-1719-CESTAT-DEL] Commissioner of Service Tax-Delhi vs. Ishida India Pvt. Ltd.

By Puloma Dalal
Jayesh Gogri
Mandar Telang Chartered Accountants
Reading Time 2 mins
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Effective use and enjoyment of service of procuring purchase orders is abroad and therefore the services are exported.

Facts:
The Respondent, a wholly owned subsidiary of a foreign company is engaged in procuring purchase orders from Indian customers on behalf of the foreign company. Goods are supplied in India and they receive “indent commission” in convertible foreign exchange at a predetermined percentage. A refund claim was filed for the service tax wrongly paid by them on the export of services. Adjudicating authority rejected the claim stating that the condition of export of services was not satisfied. Commissioner (Appeals) allowed the refund, therefore revenue is in Appeal.

Held:
The Tribunal noted that if the respondents did not canvass the purchase orders and sent it to the foreign company, there would be no supply of goods or use of goods in India at all. Therefore the service is definitely utilized/benefited by the foreign company. Merely because the goods supplied were ultimately used in India, cannot be a reason to hold that there was no export of the output service. Accordingly, it was held that the effective use and enjoyment of the service is by the foreign company and therefore refund is allowable as the services were exported.

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