2018 (10) TMI 900 – CESTAT MUMBAI – TMI – Refund/rebate of Service Tax paid on export of services – Business Auxiliary Services – service charges in the form of commission by their Parent Company – Export of Service Rule, 2005 – Held that:- The procedure of retaining the service charge/commission amount and only remitting the remaining portion of the proceeds in foreign exchange will have to be necessarily treated as saving of foreign exchange and by implication is akin to receipt of monies in convertible foreign exchange – It is nothing but saving of foreign exchange as the Appellant has retained that portion and not sent the same in foreign exchange to the Parent Company at Singapore along with other said proceeds.
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Outflow of foreign exchange has been reduced to the extent of commission/service charge retained by the Appellant within India. Such retention has to be necessarily treated as saving of foreign exchange.
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Appeal allowed – decided in favor of appellant. – ST/86
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mmission by their Parent Company as per Clause 4 of the service agreement. The said Clause 4 of the service agreement is extracted as under: Clause 4. Compensation for Services The Company shall pay to Import Express compensation for the services as follows: The service provided in Annexure A shall be the cost incurred by Import Express for providing these services plus 4% Import Express shall invoice the Company on a monthly basis. All such payments shall be made by the Company within 7 days from the date of the receipt of such invoice. The amount owed for services rendered by Import Express on behalf of the company may be netted off against the receivables of the company collected by Import Express on behalf of the company. 3. Although the customers made online payment to the Parent Company for the products purchased by them but many times they made payment for the Parent Company s products to the Appellant in India and the appellant in turn after deducting their service charge/commi
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nt Company and thereafter remits the net consideration to its Parent Company after deducting their service charges. He further submitted that had the entire amount received from the customer of Parent Company been remitted to Parent Company, the service charges due to Appellants in foreign exchange would have been paid by Parent Company from abroad. But instead of going by this lengthy process the Appellant paid only the net consideration in foreign exchange to the Parent Company and therefore in a way the Appellant has saved the foreign exchange. In other words, it is deemed that the Appellant has received entire consideration for their service charges in convertible foreign exchange as required by the Export of Service Rule, 2005. He also relied upon the decision of the Tribunal (Principal Bench, Delhi) in the matter of National Engineering Industries Ltd. Vs. CCE, Jaipur (2008) TIOL 939 wherein this Tribunal has held that receipt of consideration received in Indian Rupees in lieu of
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liary Services" which are exempted from liability to service tax. 5. The Learned Authorised Representative on behalf of the Revenue reiterates the finding in the impugned order and submitted that the appeal filed by the Appellant deserves to be dismissed. 6. According to me, since out of the total payment to be made by the Appellant in India to its Parent Company at Singapore, the same was reduced to the extent of his service charges/commission and the remaining amount was remitted to the foreign Parent Company in foreign exchange, and since such Indian Rupees was obtained in lieu of foreign exchange, therefore the same will be deemed to be convertible exchange. The Hon'ble Supreme Court in the matter of J. B. Boda & Co. Pvt. Ltd. Vs. CBDT reported in 2002- TIOL-2578-SC-IT while interpreting convertible foreign exchange under the provisions of Income Tax Act has laid down that brokerage income retained by the assessee acting as agent of foreign reinsurer, out of the premiu
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f J. B. Boda & Co. Pvt. Ltd. (supra) and the decision of the Tribunal in the matter of National Engineering Industries Ltd. (supra) and Arafaath Travels Pvt. Ltd. (supra), even the procedure of retaining the service charge/commission amount and only remitting the remaining portion of the proceeds in foreign exchange will have to be necessarily treated as saving of foreign exchange and by implication is akin to receipt of monies in convertible foreign exchange. It is nothing but saving of foreign exchange as the Appellant has retained that portion and not sent the same in foreign exchange to the Parent Company at Singapore along with other said proceeds. Outflow of foreign exchange has been reduced to the extent of commission/service charge retained by the Appellant within India. Such retention has to be necessarily treated as saving of foreign exchange. Therefore the appellant is entitled for refund and as a result, the appeal filed by the appellant is allowed. (Pronounced in Court
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