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2017-VIL-469-DEL-ST

SERVICE TAX High Court Cases

Export of Service - Verizon India entered into a Master Supply Agreement with Verizon US for rendering connectivity services for the purpose of data transfer - whether such services provided by Verizon India to Verizon US constitutes export of telecommunication services under the Finance Act, 1994 - requirement under the Export of Service Rules, 2005 for the service to be considered to be an export of service – denial of refund of unutilized Cenvat credit on the ground that the services provided by Verizon India do not qualify as 'export of services' as they are provided within India – application of Circular No. 90/1/2007 dated 3rd January, 2007 – HELD - It made no difference that Verizon India may have provided 'telecommunication service' and not 'business support services' since to qualify as export of service both had to satisfy the same criteria – the petitioner has complied with the two conditions stipulated under Rule 3 (1) (iii) of the ESR to be considered as 'export of service' i.e. the payment for the service was received in convertible foreign exchange and the recipient of the service was Verizon US which was located outside India - That Verizon India may have utilised the services of Indian telecom service providers in order to fulfil its obligations under the Master Supply Agreement with Verizon US made no difference to the fact that the recipient of service was Verizon US and the place of provision of service was outside India - The subscribers to the services of Verizon US may be 'users' of the services provided by Verizon India but under the Master Supply Agreement it was Verizon US that was the 'recipient' of such service and it was Verizon US that paid for such service. That Verizon India and Verizon US were 'related parties' was not a valid ground, in terms of the ESR or the Rule 6A of the ST Rules, to hold that there was no export of service or to deny the refund - The Circular dated 3rd January 2007 of the CBEC had no application to the case on hand. It did not pertain to provision of electronic data transfer service. It was wrongly applied by the Department. With its total repeal by the subsequent Circular dated 23rd August 2007, there was no question of it applying to deny the refund for the period January 2011 till September 2014 - Even for the period after 1st July 2012 the provision of telecommunication service by Verizon India to Verizon US satisfied the conditions under Rule 6A (1) (a), (b), (d) and (e) of the ST Rules and was therefore an 'export of service'. The amount received for the export of service was not amenable to service tax - the denial of the refund of the Cenvat credit and raising of a demand of service tax on the consideration received by it for export of telecommunication services to Verizon US are not sustainable in law and set aside – assessee petitions are allowed

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