Arcelor Mittal Projects India Pvt Ltd vs Commissioner Of Service Tax, Mumbai-II

Anil G. Shakkarwar, Member (T)

Brief facts of the case are that the appellant is a wholly owned subsidiary of Arcelor Mittal Stainless International, Paris (hereinafter referred to as AMSI). Appellant was appointed as subj-agent by AMSI and the appellant performed like a commission agent and the appellant’s job was to seek or procure sales orders for products manufactured by steel mills outside India for customers in India. Once the foreign mills and the Indian customers come to an understanding on the terms and conditions of supply, the purchase orders used to be placed on the foreign mills by the customers themselves and the goods were directly supplied by foreign mills to Indian customers and AMSI used to get commission on such transaction. A part of the commission received by AMSI was shared with the appellant in convertible foreign exchange. It appeared to Revenue that in respect of commission received by the appellant from April 2005 to January 2009, the appellant was required to pay service tax. Appellant believed that the appellant was receiving commission in convertible foreign exchange and the activity was export of service and, therefore, service tax was not payable by the appellant. Therefore, the appellant did not pay any service tax. When the department raised objection, appellant paid service tax along with interest under protest during investigation and subsequently filed a claim for refund of already paid service tax along with interest. The original authority rejected the claim of refund stating that services were not used outside India. Aggrieved by the said order, appellant preferred appeal before Commissioner (Appeals). Learned Commissioner (Appeals) through impugned order upheld the order passed by the original authority. Therefore, the appellant preferred appeal before this Tribunal.

Hearing took place before this Tribunal on 08.04.2019 and through Interim Order No. 48/2019 dated 04.07.2019, the Division Bench of this Tribunal referred the following issues to the Larger Bench, which are reproduced below.

“6.1 In view of above divergence of opinion we refer the matter to Hon’ble President to constitute a larger bench to determine the following questions of law:

i. What is extant and scope of phrase “such taxable services which are provided and used in or in relation to commerce or industry and the recipient of such services is located outside India” used in Rule 3(3)(i) of Export of Services Rules, 2005 upto 18.04.2006.

ii. What is extant and scope of phrase “such service is delivered outside India and used outside India” used in Rule 3(2)(a) of Export of Services Rules, 2005 from 19.04.2006 to 28.02.2007.

iii. What is extant and scope of phrase “services provided from India and used outside India” used in Rule 3(2)(a) of Export of Services Rules, 2005 from 01.03.2007 onwards.

iv. Whether the services rendered to foreign entity located outside India for development of its business in India will qualify as Export of Service in terms of the above phrases used in the Export of Services Rules, 2005 from time to time and the decision of Apex Court in case of GVK Industries?”

Larger Bench was constituted and hearing took place on 17. 04.2023. The Larger Bench decided the issue referred to it through Interim Order No. 26/2023 dated 09.06.2023. The decision of the Larger Bench is reproduced below:-

“54. The four issues raised in the reference order have been dealt with extensively and as they are intermingled, the reference is answered in the following manner:

(i) Arcelor India, a service provider, is providing BAS service to Arcelor France, which is a service recipient. Arcelor India is, therefore, providing service to Arcelor France which is situated outside India and Arcelor India receives consideration in convertible foreign exchange. The service provided by Arcelor India is, therefore, delivered outside India and used outside India as is the requirement under the 2005 Export Rules prior to 01.03.2007 and Arcelor India provides services from India which are used outside India as is the requirement after 01.03.2007. It cannot, therefore, be doubted that Arcelor India provides 'export of service' as contemplated under rule 3 of the 2005 Export Rules; and

(ii) Arcelor France is an agent of the foreign steel mills and Arcelor India is its sub-agent. Arcelor India provides the necessary details of the customers in India to the foreign steel mills and, thereafter, the foreign steel mills and the Indian customers execute a contract for supply of the goods. The goods are directly supplied by the foreign steel mills to the Indian customers. Arcelor India also satisfies condition (b) of rule 3(2) as payments for such service have been received in convertible foreign exchange.”

Subsequently, the appeal was listed for hearing before this Bench.

Heard the learned counsel for the appellant. Learned counsel for the appellant has submitted that since the customers were from India, Revenue had a belief that the services were provided in India. However, the Larger Bench has held that the services provided by the appellant in the present proceedings are export of service under the requirements of sub-rule (2) of Rule 3 of Export of Service Rules, 2005. He has further submitted that in view of the finding of the Larger Bench, the impugned order is not sustainable.

Heard the learned AR for Revenue. Learned AR has submitted that the issue may be decided in accordance with the decision of the Larger Bench.

We have carefully gone through the record of the case, Interim Order No. 48/2019 and Interim Order No. 26/2023 through which reference to the Larger Bench was answered. The decision of the Larger Bench is reproduced in the foregoing paragraph. The Larger Bench in very clear terms has held that in the present proceedings, the activity of the appellant is export of service.

We, therefore, set aside the impugned order and allow the appeal. Appellant shall be entitled for consequential relief at the earlist.