44i-e4 sit v.11. aro viTti : 26305065

3TRVVE - II) "WI" tied- eV-4 ‘3 041

1-11Wctrilcb tim,

31141-411-41, 316914NT4.— 380015.

TF ../......." 1:0 7 F tICq4 r File No V2(ST)143/A-IV/2013, V2(ST)169/A-IV/2013 & V2(ST)202/A-IV/2013 %

4V\ 3.11:11-F air-4'2T TT-Lstl Order-In-Appeal No..AHM-SVTAX-000-APP-023 to 025-15-16

ii Date : 21.05.2015 Wt ct) ,1 (.6) Date of Issue ±aLcc<_Lca.!

J31110-6. Twig RIT 3ITFU (31-11-r7-10 T-Tr qTR-a

Passed by Shri Sunil Kumar Singh Commissioner (Appeals-ii)

Tf ainj lien ar&r-c-orq : 3Trk7

:

Arising out of the below mentioned Order-in-Original Nos. issued by the

Deputy / Assistant Commissioner, Division-I, Service Tax, Ahmedabad

Sr. No.

Name of the appellant Order-In-Original Nos. & Date Appeals Nos.

(1) (2) (3) (4) 1. Vodafone Essar Gujarat Ltd.

(now Vodafone West Ltd.)

SD-01/Rebate/10/DC/Vodafone/ 13- 14 dated 25.04.2013

V2(ST)143/A-IV/2013

2. Vodafone Essar Gujarat Ltd. (now Vodafone West Ltd.)

SD-01/Rebate/17/AC/VWL/13-14 dated 28.07.2013

V2(ST)169/A-IV/2013

3. Vodafone Essar Gujarat Ltd.

(now Vodafone West Ltd.) 5D-01/Rebate/26/AC/VWL/13-14 dated 27.08.2013

V2(51)202/ATV/2013

affraThdf Th-T 9iff trdt Name & Address of The Appellants

As Mentioned Above seJ 310)7 3TRT7T alTATZ 4311 t ut4T1 3-r40 SfQcurif 1 3711- ffil9Ina7 'W c \LI ch Any person aggrieved by this Order-in-Appeal may file an appeal to the appropriate authority in the following way :-

#1-4r s ten . 'J cHkl T'lil t' 314T-atzt 31117:—

Appeal To Customs Central Excise And Service Tax Appellate Tribunal :-

f4-41-zr 34RIftatT,1994 Thnt tTITT as affiti 3Tta . frl=rf 1T1T1 Mc J 7i Tint:— Under Section 86 of the Finance Act 1994 an appeal lies to :-

crlttm ETITT7 'ti #011 Thst), Ticsu 'cr 3ITtARI a aft 20, FIf14 MT4TeT13- , 1)ET1'0 T PR, 315TrUict!--380016

The West Regional Bench of Customs, Excise, Service Tax Appellate Tribunal (CESTAT) at 0-20, New Mental Hospital Compound, Meghani Nagar,Ahmedabad - 380 016.

•

(ii) &LilATI a MtPr ZT 3T TT, 1994 I1 aRT 86 (1) M aiwita artita

tfq-rwq f4aPITWA, 1994 MTITI 9 (1) 31d 4 lci •fuffq.ff TO CTTit- 5 14 Thai

Ti*Jtr aTrs-r f 3Tfli m- l 51r uteri

7)1( wt wftq (

wrrfard crt TiNT -nriq Th-r wrptit

13 42-1-d t, -111 •2114v11.)1, e4 .4M th 'R-11Z7ft th TIWinth Atri th '11 4-1 tCitFa c15

th t‘f tmim7 met ter, prat ~9 -Mir, 3E7 am-Ert Trm t),-R, 5 -MET zif B7r

t (461 7rm l000/- m97-i triN U Fl r tr din,arR- l ni i 3tH arrgE TRE li 1r

1:fR 5 aTU ill- 50 'FIN WM el a'r 5000/- --gf M°I Thcl

TliTT Ng 11711 W:R 50 'M-QTA WT-it 15i -11-q 10000 /- 11R1

(ii) The appeal under sub section (1) of Section 86 of the Finance Act 1994 to the

Appellate Tribunal Shall be filed in quadruplicate in Form S.T.5 as prescribed under Rule

9(1) of the Service Tax Rules 1994 and Shall be accomPanied d bybe a copy of the ed order

appealed against (one of which shall be certified copy) and shoul accompani fees of Rs. 10001- where the amount of service tax & interest demanded & penalty levied of Rs. 5 Lakhs or less, Rs.5000/- where the amount of service tax & interest demanded & penalty levied is is more than five lakhs but not exceeding Rs. Fifty Lakhs, Rs.10,000/- where 'the amount of service tax & interest demanded & penalty levied is more than fifty Lakhs ruees, in the form of crossed bank draft in favour of the Assistant egtrar of th

bench of p nominated Public Sector Bank of the place where the bench of Tribu

Rnal i

iss situated.

e

(iii) 1:46TEl 3TOWi,t994 ml gRI 86 -4 \34-t1TRTA T4(2 . ) ardltd &M P" titilTYR

I -VTRYWA, 1994 tai 9 (2K) 1*.Tilkd- TM% 1“1.t1.-7 Mel TM - 9M411 3T145 'TB &

3TRIOTI„ 040 M 31Tt& T.bc‘ 1nd-Za (01A)( 3w1 wiTibm cult tuft) 3E-.3t,k

amicm, / \34 3T1r1 3121-41 A219k 7ik4r4 W41-4- 3T4t 11T I TfliOth3ITY 3114 ,-1 --cm4

*I-4t4T ak) 3E-hr (010)m9 ;tea .4K4) tYMI

(iii) The appeal under sub section (2A) of the section 86 the Finance Act 1994, shall be

filed in Form ST-7 as prescribed under Rule 9 (2A) of the Service Tax Rules, 1994 and shall be accompanied by a copy of order of Commissioner Central Excise the Addl. / Joint or Dy.

(Appeals)(0IA)(one of

which shall be a certified copy) and copy of the order passed y /Asstt. Commissioner or Superintendent of Central Excise & Service Tax

(010) to apply to

the Appellate Tribunal.

2. -z12-1-RTWIf :11Tfrall 3Tre4TITT 1975 Mei 70 IR 3-Wit-1 31-60- -1413-d

397-{R 3T1}ta SITRIMIt M aTTtql *I a ER 6.50/ - t17- MT RTPTTall

am 61m qrft-q

2.. One copy of application or O.I.O. as the case may be, and the order of the

adjudication authority shall bear a cou fee stamp of Rs.6.50 paise as prescribed under

Schedule-1 in terms of the Court Fee Act

rt ,1975, as amended.

3. #ffr .3c9K L;ci Arwm 341A -E1 rtilzrOuTur (*)-(a614) I;P-ITIITIa 1982'1 T1MTI

[rd 31-0 TWO T TTFral , •11-41 cid crA (11(4 ft alt ThrA 30 1ft 61119 arlFblita fiber ,Ecir t

: : 3 : :

3. Attention is also invited to the rules covering these and other related matters . contained in the Customs, Excise and Service Appellate Tribunal (Procedure) Rules, 1982.

4. Tfrarr 2 t-rtizr .5cLi14 Lrd 3fIrarzt lA (*Ma") i Aft Mt-A

Turd! # rzr bruic qicKr) 3iftrrdzig, ?en er sovw 3rd fterzr(krnrr-R) atitrfkzp:r Rotv(Roev 9) oc.R Thkrzr AtedzraT, ?SSW 'it• tur C3 c 3fraifF #4-rw-4- m--1 a#f clidj,*r Ifk-a- *I- art 0-i-rffr Tarr cfreor 3#Warzl . mr4 f p. cz-4-r 3fraira wart *If alia 4141 31errea - 4--4:r cnils ff gfi

tar ort-iiq ge.cp gd - trawt 3rd " TOT fbt alr %ea) a fae-G-i 21rDei

cl-rtr 11 tt 31a-aia. 11trfra . ictufi

(ii) trkte 7WT Z #t a -rt diem Trft

(iii) tat-6 7arr eit eldi 6 31WIF tzr

Er> 3114 TQO' z17 f gINT IfiatIM" WM" (44". 2) 3iftlfAzIaT, 2014 MP:R*0

%4.11 3itirkrzr,crritcbil) u -sru f4--4-rus-fra. T2TI' 317Jf f 311tIW Ti aft Cl 4 I

4. For an appeal to be filed before the CESTAT, it is mandatory to pre-deposit an amount specified under the Finance (No. 2) Act, 2014 (No: 25 of 2014) dated 06.08.2014, under section 35F of the Central Excise Act, 1944 which is also made applicable to Service Tax under section 83 of the Finance Act, 1994 provided the amount of pre-deposit payable would be subject to ceiling of Rs. Ten Crores,

Under Central Excise and Service Tax, "Duty demanded" shall include: (i) amount determined under Section 11 D; (ii) amount of erroneous Cenvat Credit taken; (iii) amount payable under Rule 6 of the Cenvat Credit Rules.

c> Provided further that the provisions of this Section shall not apply to the stay application and appeals pending before any appellate authority prior to the commencement of the Finance (No.2) Act, 2014.

4(1) Tff tot k r Wsd-2r 31111W t TRW oi€ 2 c 311MT 2 c 711 1:rg Saari' krk row am sio<r, slard-rkut 3iti" 4)4ei 417-6 'Mari ZiFq ♦(1-6 10% 3F1-drff w4wa- ti

4(1) In view of above, an appeal against this order shall lie before the Tribunal on payment of 10% of the duty demanded where duty or duty and penalty are in dispute, or penalty, where penalty alone is in dispute.

4

V2 (ST)143/A -IV/2013

V2(51)169/A1V/20 13

V2(ST)202/A-IV/2013

ORDER IN APPEAL

This order arises out of the appeals filed by M/s Vodafone Essar Gujarat Ltd. (now name

changed to Vodafone West Limited), having its office at Vodafone House, Prahladnagar,

Off S. G. Highway, Ahmedabad (hereinafter referred to as "the appellant"), on dates and

against the Order In Originals (hereinafter referred to as the impugned orders), passed by the

competent authorities (hereinafter referred to as the adjudicating authority) elaborated as

f ollows,

Appeal No./dated

(i)

V2(ST)143/A-IV/2013

dated 27.6 2013

V2(ST)169/A - IV/2013

, dated 3.9.2013

Order in Original Numbers

(ii)

SD-01/Rebate /10/ DC/

Vodafone/13-14 dated

25.4.2013

Passed by

(iii)

Deputy

Commissioner

Service Tax,

Division-I,

Ahmedabad

Rebate/Refundl

amount

involved

(iv)

86,314

1,61,839

Period to

which '

pertaining

(v)

February

2012 .

April 2012

June 2032

SD-01/Reb/17/AC/VWL/ 13-14

dated 28.7.2013

- do -

-do- 1,07,288 V2(ST)202/A - IV/2013

dated 8.11.2013

SD-01/Reb/26/AC/VWL/13-14

dated 27.8.2013

2. Since all the above appeals are pertaining to a single issue, I hereby take up all the appeals

simultaneoUsly to be decided under this Order itself. The relevant facts of the case are that the

appellant has filed the rebate claims to the extent shown above under Column No. (iv) (Table

above) pertaining to the period shown under Column No. (v) (table above), under Rule 5 of the

Lxport of Service Rules, 2005 read with Notification No. 11/2005-ST dated 19.4.2005 in respect

of the Service Tax paid by the provider of the said Services. The rebate claim was scrutinized by

the department and the following objections were culled out,

a)The documents furnished alongwith the claim suggested that the appellant had already

passed on the burden of Service Tax on to their clients, thus unjust enrichment prevailed.

b)The appellant has been providing the 'Telecommunication services a taxable service as

defined under Section 65(109a) of the Finance Act, 1994, to the customer/client of

5

V2(ST)143/A-IV/2013

V2(ST)169/A-IV/2013

V2(ST)202/A-IV/2013 foreign telecom operator when he/she is on a visit to India. For services so provided

to such an inbound customer, the appellant makes billing to foreign telecom

operator and receives the amount in respect of such bills in foreign currency. The

appellant finds classification of such services as Export of Services under Export of

Service Rules, 2005 and thus the rebate of the Service Tax paid on such services.

However, the department held that as per Rule 3(2) of the Export of the Service Rules,

2005, the service shall be treated to have been exported when such service, is

provided from India and used outside India. Further the recipient of the service

should also be located outside India.

c) Also the appellant had failed to file the FIRC in respect of the Serial Numbers mentioned

at Para 10 of the impugned order.

3. Besides the above it was observed that since the appellant had not exported the

services in terms of Rule 3 of the Export of Service Rules, 2005 read with Circular No.

90/1/2007 dated 3.1.2007 and Notification No. 36/2007 dated 15.6.2007 in as much as tax

on services is destination based and the services have been provided to the subscriber of

foreign telecom in India. Hende the services were generated in India as it had been provided

by domestic telecom provider and it had also been consumed in India and also the recipient

was located in India. Mere receipts of payment in respect of the service consumed in India in

Foreign currency does not render the said services as having been provided to a place

outside India, so as to satisfy the condition of Export of Services.

4. Based on the above findings, showcause notices were issued to the appellant

proposing rejection of the respective rebate claims to the tune of the amount(s) shown

respectively under Column No. (iv) of the Table above respectively. After taking into

consideration the submissions of the appellant, the adjudicating authority rejected the

refund claim, broadly based on the following findings,

a) the applicability of levy of Service Tax on roaming service provided to the

International inbound roamer i.e. subscriber of a foreign telecom network, by the

V2(Sf)143/A-IV/2013

V2(ST)169/A-IV/201 3

V2(ST)202/A-IV/2013

Indian domestic provider, is liable to pay the Service Tax from 15.1.2007 on amount

received through the home network on account of service provided to such

international roaming service subscriber. The same is on account of interpretation

under Circular No. 90/1/2007-ST dated 3.1.2007, followed by the Notification No.

36/2007-ST dated 15.6.2007. However, as per the said Notification, the services were

always leviable to Service Tax under Section 65(105) (b) of the Finance Act, 1994 but

the same could not be treated as Export of Services.

b) Section 65(109a) of the Finance Act, 1994 was brought by virtue of s. 135 of the

Finance Act, 2007 (22 of 2007) with effect from 01.06.2007, wherein the

'Telecommunication Service' was defined under the said Section and brought into

Service Tax net — inbound and outbound roaming services to and from national and

international destinations. Hence, this legislation provided that domestic telecom

operators providing roaming services to 'International inbound roamer' are liable

to Service Tax.

The services provided by the appellant were only to benefit the International Inbound

roamer (consumers) in Indian Territory. The end use of the service is located in India and

the need of such consumer is met by the appellant on behalf of Foreign Telecom

operators, hence such services have never been exported. The benefit of service is

terminated in India only, without travelling abroad. Since the service is consumed in

India, the services exhausts or is extinct there at without being exported, thus losing its

utility.

c1) The appellant has also not satisfied the conditions set out under the Circular No.

111/05/2009-ST so as to qualify the above services under export. Also the appellant has

failed to qualify the services so rendered as export of services in view of the

conditions set under Circular No. 141/10/2011 - TRU dated 13.5.2011 read with

Rule 3(1) & 3(2) of the Export of Service Rules, 2005.

e) The claim is time barred in terms of Section II B of the Central Excise Act, 1944, since

the rebate claim pertains to the period April 2008 to March 7009 and is filed on

7

V2(ST)143/A-IV/2013 V2(ST)169/A-IV/2013

9.11.2009. V2(ST)202/A-IV/2.013

I) The appellant has no authority to collect the Service Tax on export of services (service

tax not leviable on export of services). If the appellant has collected Service Tax from

the client then he has to pay the said collected Service Tax amount to the

Government as per Section 73A of the Finance Act, 1994. In case of export of

services the appellant was not supposed to charge any Service Tax, however he

could have paid the Service Tax on his own and bear burden of such Tax, then and

thereafter only he can file the rebate claim as per the provisions. However the

appellant has failed to give any documentary or any other evidence to establish that

amount of refund is claimed was collected from, or paid by him and the incidence of

such duty has not been passed on by him to any other person. In this case the

appellant has already issued invoices with Service Tax, thus he has already charged

Service Tax from clients and thus the appellant has not suffered any loss and not paid

any excess duty from his own pocket. Hence, the appellant has crossed the bar of unjust

enrichment.

5. Based on the above findings broadly, the respective rebate claims (under the

appeals shown at Column No. (i) of the table above filed by the appellant, were rejected

under the respective impugned orders (shown at Column No. (H) of the Table above).

6. Aggrieved by the impugned order, the appellant is before me on the following

grounds under his appeal,

a) Honorable CESTAT, Mumbai under its order dated 12.3.2013 had allowed the appeal

filed by Vodafone Cellular Limited, a group of entity of VWL (operating in the telecom

circle of Maharashtra & Goa against Orders of Commissioner Appeals, which

erroneously considered the subject services not to qualify as exports. The Honorable

V2 (ST )143/ATV/2013 V2(ST)159/ATV/2013 V2(ST)202/Aelv/2013

CESTAT held that the contracting parties under the instant appeal are Vodafone Cellular

Limited and FTO outside India inasmuch as there is no contract between the Vodafone

Cellular Limited and the subscribers of FT0s.

b) All conditions under the Export Rules had been satisfied by the appellant necessary for

the services to qualify as 'export' under the Export Rules, namely a) The Services are

provided to a recipient located outside India; b) The services are provided from India

and used outside India (not applicable in the subject period of rebate claim) and c)

Consideration for the service is received in convertible foreign exchange inasmuch as

the observations of the Honorable CESTAT also marks at Para 5.2 under the order ibicl

that the services are provided to the [TO who is located outside India and therefore the

transactions constitute exports. Also the Ratio of judgement in case of Paul Merchants

Limited (2012-TIOL-1877-CESTAT-Del) was squarely applied to the present case wherein

it was held that the services provided on behalf of a foreign contracting aprty cannot he

said to be rendered to the customer of such a party.

c)If the contention of the adjudicating authority had to be taken correct, than no service

which is taxable would qualify as export under the Export Rules. This is because by

virtue of the regulatory provisions, a telegraph authority is allowed to operate only in

the licensed area. Clearly, this does not appear to be the intent of legislation, which the

adjudicating authority had chosen to ignore.

d) The*appellant in this case has fulfilled all the provisions of the Export Rules inasmuch

as the appellant provides the taxable services to overseas Foreign telecom Company

(FTO's) who have their permanent establishment located outside India and have

their entire business operations outside India. In this connection the appellant has

entered into contracts with the HO's in order to provide the services. The

invoices are raised to such E l'O's for the international inbound roaming

services. The appellant has no commercial or contractual relationship with the

44.425,,t___

9

V2(ST)143/A-IV/2013

V2 (ST)169/A-IV/2013

V2 (ST)202/A-1V/2013 subscribers of the FTO's. Hence for all the purposes the service recipient is the FTO.

e) The international inbound roaming services provided by the appellant qualify as exports

under the provisions of the Export Rules. In this regards, the appellant submits that the

requirement of services to be provided from India and used outside India has been

eliminated vide the Export of Services (Amendment) Rules, 2010 w.e.f. 27.2.2010 and

hence since the the subject requirement of the service to be provided from India and

used outside India is not a condition applicable for export categorization of the

telecommunication service for the disputed period, the impugned order should be set

aside on this grounds itself and the rebate should have been granted.

f) The concluding paragraph of Circular No. 111/5/2009-ST dated 24.2.2009, clearly

states that even if the relevant activities in relation to the service provided take

place in India, the provision of such service would amount to export of services if

the benefit of such service accrues outside India. In the present case, the privities

of contract is between the appellant and the FTO and not between the appellant

and the inbound roamer. Also during the visit of such inbound roamer to India, he

continues being the subscriber of the FTO and the arrangement for provision of

services is also in such a manner.

g) The observation of Honorable Supreme Court in case of All India Federation of Tax

practitioners Vs. Union of India reported at 2007 (7) SIR 625 (SC) was also discussed and

deferred in case of IBM India (P) Ltd. Vs. CCE Bangalore wherein stay was granted to the

appellant relying on the Circular 111/05/2009-5T dated 24.2.2009, wherein it was clearly

explained that under Category III (Rule 3(1)(iii) of the Export Rules), for a service to

qualify as export of service the relevant factor is the location of the service receiver and

not the place of performance.

h)The Honorable member of the CESTAT under their order ibid at para 70.2 of the

1 0

V2(ST)143/A-IV/201 3

V2(ST)169/A-IV/20 13

V2(ST)202/A-IV/20 13

judgement had observed that for taxing a service, it is not ht eplace of performance but

the place of consumption which is relevant inasmuch as consumption of service has to

be determined giving recognition to each of the three categories of the services laid

down by the Export Rules. Accordingly Category III services in relation to business (as in

the present case of appellant) are consumed at the place where the business is located.

i) A constant link is maintained with the FTO during the performance of the services

inasmuch as during and after a call is made/received by an inbound roamer, the

appellant always seeks approval from the FTO in order to facilitate the call. Wherever

such approval is not received, the call cannot be made by the inbound roamer.

Circular No. 90/1/2007-ST dated 3.1.2007 has been withdrawn by Circular No.

96/1/2007-ST dated 23.8.2007. Similarly the Notification No. 36/2007 dated

15.6.2007 was issued pursuant to Circular No. 90/1/2007-ST dated 3.1.2007. The

said Notification was issued to settle the ambiguity in relation to the taxation of

inbound roaming services for the period prior to the issue of the siad Circular.

The appellant wishes to submit that the provision of Export Rules have

undergone change, hence the notification ceases to be effective.

k) Circular No. 141/10/2011-TRU dated 13.5,2011 to the rebate claims under the

instant appeal are non applicable inasmuch as in the instant case the FTO has

procured the international inbound roaming services in order to fulfil their obligation

to provide global connectivity to their customers. In this connection, the

consideration for such services is also directly received by such FTOs from their

customer. Given this fact, it is established beyond any iota of doubt tht the benefit

of the services provided by the appellant accrues to the 1 1 TO's and as such the

services can be said to be used outside India in terms of the Circular No.

115/05/2009 - 5T dated 24.2.2009 and also Circular No. 141/10/2011-11Th dated

13.5.2011 Hence notwithstanding the above, the Circular No. 141/10/2011 - TRU

11

V2(ST)143/A-IV/2013

V2(ST)169/A-IV/2013

V2(ST)202/4-1V/2013 dated 13.5.2011 cannot be relied upon to assess/adjudicate the export status of

international inbound roaming services provided by Appellant on account of the

reasons (emphasis supplied under Para 137 of the Grounds of appeal).

I) The Policy Circular No. 25 (Re-07)/2004-09 dated 1.1.2008 issued by DGFT stands non

applicable in this case as the same was withdrawn vide Policy Circular No. 38/2009-

14 dated 15.7.2010, which specifically declared that para 3(i) of the Policy circular 25

to be deleted ab-initio. Accordingly SFIS claims were to be allowed on gross foreign

exchange earnings.

Unjust enrichment does not apply in case of export of services and is not applicable

in respect of the rebate claim, as Section 11 B (2) of the Central Excise Act, 1944

sets out the fact that doctrine of unjust enrichment does not apply in case of rebate

of Central Excise Duties/Service Tax on export of goods/services. In this regards, the

appellant has also cited the decisions of Honorable CESTAT in case of Uttam Steel

Limited Vs Union of India reported at 2003 (158)ELT 274 (Born), Dorcase Market

Makers pvt Ltd. Vs. CCE Chennai, reported at 2012 TIOL 108 HC Mad Cx.

n) As there is no mechanism to show separately the value of the services

exported by the appellant in column c(i) in the Service Tax Return (ST-3), to capture

the scenario of clearance of export services under payment of tax, the same should

have not be taken as a ground to reject the rebate claim.

Besides the appellant has supplied lot of emphasis in relation to the Order of the

Honorable CESTAT Mumbai, in case of their group entity under Order No. A/503- 508/13/C

STB/C-1 dated 12.3.2013

7. Personal hearing was granted wherein the Shri V N Thakore appeared on behalf of the

appellant on 20.5.2015 in case of all the appeals mentioned under Table at Para 1 above

12

V2(ST)143/A-IV/2013

V2(ST)169/A-IV/2013

V2(ST)202/A-IV/2013

Shri V N Thakore reiterated the grounds of appeal memorandum.

3, have gone through the facts of the case, the impugned order, grounds of appeal

under the appeal memo, case laws cited by the appellant, evidences placed across and

also the Order issued by Honorable CESTAT, Mumbai, issued in their favour, in the similar

regards.

9 First of all, I would visit the Circular No. 90/1/2007 dated 3.1.2007 which especially at the

material time propounded the taxability on Inbound International Roamers under the Telephone

Services and simultaneously provides an in-depth clarification to the nature of such services,

relevant paras which are as follows,

-I. ht terms of the provisions of the Finance Act, 1994, telephone connection service means 'any

service provided to a subscriber by the telegraph authority in relation ton telephone connection'.

Subscriber means 'a person to whom any service of a telephone connection has been provided by

the

telegraph authority'. During international roaming, the visiting network iwovides service to a

person treating him as a subscriber on a tenwororii basis for the period (luring which .service

cnznhd oaf by such person from the visited network. The only difference is that the purulent is not

direct/s received from the subscriber, but the same is routed through the home network. Iliwever, this

does not alter the essential characteristics of the .service, which is of o telephone connection does 1101

liccessurily neon providing a telephone in.suiument or providing a S111 cavil. Telephone connection

provided so long as the telecom operator provides the facility to a person to make a connection for

making or receiving a call (using a telephone) b' assigning o tongue identification number to

line instrument or card used for making a coll. :An identification inu»ber is essential, interolia, for

routing the call to such line/instrument or card and to bill for the call charges Discd upon the duration

ol a call. Even if this number is allocated tempororilv and insert/all, it remains a service of telephone

ipnnection. Futher, the issues of entering into it contract or verification al the subscriber are not

iilevitru to the levy of service tax. .1l heriilOre, during the period of rooming, the Indian telecom service provider provides telephone

cirvice to an international in-hotrod 10(inter. This service to in-bound roamers is delivered and consumed

in India and, therefore, it is not an export of service. International practice treats the telephone service

provided to an in-bound roamer by the visited network, for pirpose.s of taxation, in the some 1110/71177I as

a telephone service provided to any home subscriber.

O. Accordinkly, the domestic telecom operators providing roaming service to i»ternatimial in-

bound roamers are liable to par service tax on the amount received through the home nehvork on

account of service provided to such international roaming subscriber. The field formations may take action, for collection of service tar on the basis of this circular

-only in respect of .slich services which would be provided to an international in-bound roamer front

S. 1.2011T onwards. . For the period prior to this date, the matter is under examination of the Board.

13

V2(ST)143/A-IV/2013

V2(ST)169/A-IV/2013

V2(ST)202/A-IV/ 10. Hence the above circular clarified and asserted the taxability on the said services

provided to the International Inbound Roamer and at the same time conveyed the fact that

the said services did not fell under the ambit of Export of Services as the service of providing

Inlernational Inbound Roaming was not targeted towards any other country but it was provided

lo the "International In-bound Roamer" only during his visit in India and therefore, it cannot be

said that the service was provided by the appellant abroad as the recipients of such service was

inside India. Thus, as the service is delivered and consumed within India, hence, "International

Inbound roaming" service cannot be treated as export of service under Rule 3(1) of Export

Rules.

The legal principle settled by the above Circular was followed by Notification No. 36/2007-

31 dated 15.6.2007, which is reproduced as follows,

"Whereas, the Central Government is satisfied that a practice was generally prevalent regarding levy

(.!f service tax (including nondevy thereofi, under section 66 of the Finance Act, 1994 (32 of 1994)

thereinafter referred to as the Finance Act). on roaming service provided to an international in-bound

roam* subscriber, by a telegraph authority, and that such services being a taxable service were liable

to service tax under sub-clause (b) of clause (105) of section 6? of the Finance Act, which was not being

levied according to the said practice during the period commencing from the 1st day of July. 1994 and ending with the 14th day allaintaty, 2007;

Now, therefore, in exercise of the powers conferred by section 11 C of the Central Excise Act 1944

of 1944) read with section 83 of the Finance AO; the Central government hereby directs that the service tat payable on roaming services provided by a telegraph authority to an international in- bound roaming subscriber, which was not being levied in accordance with the said practice, shall not

JI)e required to be paid in respect of such roaming service provided during the aforesaid period"

12. The above notification, even while exempting the payment of

service tax on the telecommunication service provided by the domestic Telecom

operators to international inbound roaming subscriber, for the period 1st July 1994 to 14 th

January 2007, makes it clear that the said services are otherwise taxable. The said

Notification was very much in force during the period under the claim contrary to

what has been contended by the appellant. Hence, I find that Notification No.36/2007-ST

dated 15.06.2007 read with Circular No. 90/1/2007-S.T. dated 03.01.2007 very specifically

provides that service tax is leviable on "International Inbound Roaming service" from 15.01.2007 onwards.

14

V2(ST)143/A-IV/2013

V2(ST)169/A1V/2013

V2(ST)202/A-IV/2013

13. Further the said Telephone Services defined under Section 65(105)(b) and the

Telegraph Services, as defined under Section 65(110) of the Finance Act, 1994 respectively

were merged into one 'Telecommunication Services brought vide Finance Act, 2007 with

effect from 1.6.2007 and defined under Section 65(109a) of the Finance Act, 1994, and

cia rification on the same stood vide Board's (TRU's) Letter DOF No. 334/1/2007 (TRU) dated

28.2 2007. The relevant text of the statute incorporating the Inbound International roamers

and governing the taxability on the said 'Telecommunication Service' is as follows,

i (PEW "Ielecommuniccition Service" means service of anv description provided hr means of tiny

tronsolission, emission or reception of signs. signals, writing, images and .sound, or intelligence or

iniormation of any nature, by wire, rudiO, optical. visual at other electro-ma,gnetic means or 8y5/011.C,

including the related transer or assignment 01 the right 10 use capacitr such transmission.

:]uaysion or reception by a person who has been granted 0 licence under the not proviso to sub-

section th of section 4 of the Indian Telegraph Act. 1865 and includes-

(i),oo. inn cellular mobile telephone services including provision of access to and use of switched or non- \witched networks for the transmission of voico, data and video. inbound and outbound roaming

\civic() to and from tuitional and international destinations,

14. The above law makes it amply clear that the inbound and outbound roaming service to

and from International destinations have been clear brought under the ambit of Service

tax plus a Notification (36/2007-ST) in this regards makes it more amply clear. Also the

contention of the appellant that the withdrawal of Circular No.90/1/2007 - ST dated 3.1.2007,

the Notification No.36/2007 -ST dated 15.06.2007 ceases to be effective is not sustainable as

the said Notification is still in force and it very specifically provides that "International Inbound

Roaming service" is leviable to service tax and not exempted from 15.01.2007 onwards.

15. The appellant further contends to submit that International inbound roaming services

provided by them qualify as export of service under Rule 3(1) of Export Rules, read with Para

2(iii) of Circular 111/5/2009-ST dated 24.02.2009. The text of the said Circular is reproduced as

follows,

e5-8.1 .55

15

V2(51)143/A-IVP013

V2(ST)169/A-IV/2013

V2(51)202/A-IV/2(113 Subject: Applicability of the provisions of the Export of ilervicesH • Rules, 2005 in certain situations.

.• In terms of rule 3(2)(a) of the Export of Services Rules 2005, a taxable service shall be treated as export of service if "such service is provided from Indiaand used outside India". Instances have come to notice that certain activities, illustrations!of which are given below, are denied the benefit of export of services and the refund! of service tax under rule 5 of the Cenvat Credit Rules, 2004 [Notification No 5/2006-CE. (NT), dated 14-3-200,61 on the ground that these activities do not satisfy the condition 'used outside -

(i) Call centres engaged by foreign companies who attend to calls from customers or prospective customers from all around the world including from India ;

Medical transcription where the case history of a patient as dictated by the doctor abroad is typed out in India and forwarded back to him:

010 Indian agents who undertake marketing in India of goods of a foreign seller. In this case, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign

exchange:

Olif Foreign financial institution desiring transfer of remittances to India. engagingan Indian organisation to dispatch such remittances to the receiver in India. For this, the foreign financial institution pays commission to the Indian organisation in foreign exchange for the entire activity being undertaken in India.

The departmental officers seem to have taken a view in such cases that since.the activities pertaining to provision of service are undertaken in India, it cannot be said that the use of the service has been outside India.

2. The matter has been examined. Sub-rude (I) of rule 3 of the Export of Services Rule, 2005 categorizes the services into three categories

(i) Category . I [Rule 3(1)(i)] : For services (such as Architect service, General Insurance service, Construction service, Site Preparation service) that have some nexus with immovable property, it is provided that the provision of such service would be 'export' if they are provided in relation to an immovable property situated outside India.

(ii) Category II [Rule 3(1)001 : For services (such as Rent-a-Cab operator, Market Research Agency service, Survey and Exploration of Minerals service, Convention service , Security Agency service, Storage and Warehousing service) where the place of •performance of service can be established, it is provided that provision of such services would he 'export' if they are performed (or even partly performed) outside India.

(iii) Category III Mule 3(1)(11W : For the remaining services (that would not fall under category I or II), which would generally include knowledge or technique

based services, which are not linked to an identifiable inn/lovable property or whose location of performance cannot be readily identifiable (such as, Banking and Other Financial services, Business Auxiliary services and Telecom services), it has been specified that they would be 'export'. -

(a) If they are provided in relation to business or commerce to a recipient located outside India; and

16

V2(ST)143/A-IV/2013

V2(ST)169/A-IV/2013

V2(ST)202/A-IV/2013

) If they are provided in relation to activities other than business or .

commerce to a recipient located outside India at the time when such

services are provided.

3 11 is an accepted legal principle that the law has to be read harmoniously so as

to avoid contradictions within a legislation. Keeping this principle in view, the meaning of

the term used outside India' has to be understood in the context of the characteristics of

particular category of service as mentioned in sub-rule (I) o .f . rule 3. For example.

under Architect service (a Category I service (Rule 30)(1), even if (In Indian architect

prepares a design sitting in India far a property located in U.K. and hands it over to the

owner of such property having his business and residence in India, it would have to be

presumed that service has been used outside India. Similarly, if an Indian event

manager (a Cotegory II service [Rule 311)00 arranges a seminarfor an Indian company

in U.K. the service has to he treated to have been used outside India because the place

pcchiniance is U.K. even though the benefit of such a seminar may flow back to the

,.,nplityees serving the company in India. For the services that fall under Category

Ride 3( the relevant factor is the location of the service receiver and not the

place of petformance of performance. In this . context, the phrase used outside India' is

to h e interpreted to mean that the benefit of the service should accrue outside India

Huts, for Category III services [Rule 3( I unit], it is possible that export of service may

take place even when all the relevant activities take place in India so long as the

benefits of these services ((Leine. outside India. he all the illustrations mentioned in

the opening paragraph, what is accruing outside India is. ale benefit in ILinIC

yi0M011011 of business of (1 foreign company. Similar would he the treatment for other

s'ategory Ill [Rule 3(1)(iii)] services ens ire/ 4. All pending cases may he disposed of accordingly In case any difficulty

is facet, iii implementing these instructions, the Sallie may he brought to the notice of the

undersigned. These instructions should he given wide publicity among trade and

field officers."

flOpillICiS added)

16. In the above circular attempt was made to find the location of those services

whose use cannot be determined. It was in that background that the circular seems

to have postulated a view that For the services that fall under Category III [Rule

3(1)(iii)1, the relevant factor is the location of the service receiver and not the place

of performance. In this context, the phrase 'used outside India' is to be interpreted

to mean that the benefit of the service should accrue outside India. Thus, for

Category III services [Rule 3(1)(iii)1, it is possible that export of service may take

place even when all the relevant activities take place in India so long as the

benefits of these services accrue outside India.' This view has been specifically

for those cases where there is no way to determine the 'use' aspect of the service.

17

V 2 (ST)1437A-IV/2013 V2(S1)169/A-IV/2013 V2 (ST /2013 It

is not in doubt that the location of the service provider need not be)2 02/A - I

the li

V

tmus

test for determining the place of its consumption. Therefore the circular does not

violate the underlying principle that service tax is a destination based consumption

tax, and it is obvious that it was not issued with the service of international roaming

specifically provides that service tax is leviable on "International Inbound Roaming service"

fr'brn 15.01.2007 onwards. Similarly the adjudicating authority under his findings has very well

incorporated this issue in detail under the impugned 010 that the service of providing

International Inbound Roaming was not targeted towards any other country but it was provided

to the "International In-bound Roamer" only during his visit in India and therefore, it cannot be

viewed that the service was provided by the appellant abroad as the recipients of such service

was inside India. Thus, as the service is delivered and consumed within India, hence,

"International Inbound roaming" service cannot be treated as export of service under Rule 3(1)

of Export Rules. I also would like to point out that the Circulars issued by the Board are binding

on the departmental officers as has been held by the Honorable Supreme Court in case of

Rariadey Micronutrients Vs. CCE reported at 1996 (87)ELT 19 (SC) and Paper Products Ltd Vs.

(.CE reported at 1996 (112) ELT 756 (SC).

17. Further the above Circular was further clarified by Board under its Circular

No. 141/10/2011-TRU dated 13.05.2011. The text of the same is reproduced as below,

"Circular No. 111/05/2009-S.T was issued on 24th February 2009 12009 (13) S.T.R. C871 on

the applicability of the provisions of the Export of Services Rules. 2005 in certain situations. It had clarified on the expression "used outside India" in Rule 3(2)(a) of the Export of Services Rules .

. 2005 as prevalent at that time. The condition specified in Rule 3(2)(a) has since been tnnitted vide Notification 6/2010-S. T, dated 27 Feb. 2010. In the context of the slated Circular an issue has been raised, whether for the period prior to 28-2-2010 the requirement that the service

in mind where there is no dispute about the location of the consumption. I find that the

service of "International In-bound Roaming" was provided by the appellant to "International In-

bound Roamer (Subscriber of foreign Telecom Operator)" during his / her visit in India and thus,

"International Inbound Roamer" received the benefit of such service. I find that Notification

No.36/2007-ST dated 15.06.2007 read with Circular No. 90/1/2007-S.T. dated 03.01.2007 very

18

V2(ST)143/A-IV/2013 V2(ST)169/A1V/2013 V2(ST)202/A-IV/2013

should he "user/ outside indid"iiirdgiabic weans the location of the recipient/

2 In the stated Circular it was inter cilia, clarified that the words, "used outside India" .should be

interpreted to mean that "the benefit of the service should accrue outside India". It is well known that .service.s, being largely intangibles, are capable of being paid from one place and actually used at

another place. Such arrangements commonly exist where the services are procured centrally f;.g. audit. advertisement. consultancy, Business 1atiliory Services. For example. it Is pos.sible to

obtain a consultancy report front n service provider in India, which may be used either at the

location of the customer or in any other place outside India or even in India. Iii a situation

fihere the consultancy, though paid by a client located outside India, is actually used in respect of ea

project or an activity in India the service cannot be said to be used outside India.

3 h may lie noted that the words "accrual of benefit" are not restricted to mere impact on the bottom-

line of the person who pays fir the service. If that were the intention it would render the

requirement of services being used outside India during the period prior to 2S-2-2010 infructuous.

these word, should be given a harmonious interpretation keeping in view that during the period

Lynn 27-2-20I0 the explicit condition was provided in the rule that the service should he used

outside India. hi other words these words may he interpreted in the context where the effective use

enjoyment of the service has been obtained. The effective use and enjoyment of the service

it ill of course depend on the nature of the service. For example effective use of advertising

services shall he the place where the advertising material is dissentinatecl to the audience though

actually the benefit mitylinally accrue to the buyer who is located atc nrother place

4. This, however should not apply to services which are merely performed from India and where

the accrual of benefit and their use outside India are not in conflict with each other. The relation

between the parties may also be relevant in certain circumstances. .for example in case of passive

holding subsidiary companies or associated etilertWises. In order to establish that the services have

not been used outside India the facts available should inter cilia. clearly indicate that only the

payment has been received from abroad and the service has been used in huhu. It has already been

clarified that in case of call centers and similar businesses which serve the cittomers located outside

podia for their clients IMO are also located outside India the service is used outside India

5, Besides above. to attain the status of export, a number of conditions need to he satisfied

which are specified in Rule 3( f and Rule 3(2) of Export of Services Rules,

2005. !he Circular No. 111/05/2009-S F eAplained the espy ession "used outside India" only and the

other conjunct conditions. as applicable..from time to time. also need to be

independently satisfied for availing the benefit of an export"

ifimphasis aildech

18 The above Circular seeks to rule out of lot of ambiguities in the previous Circular viz.,

Circular 111/5/2009-ST dated 24.02.2009. The principle that the place of consumption defines

the location•of the service was reinforced. It follows that the location of Service provided may

not be relevant nor is the place of performance of the Service relevant, but what is relevant, is

the place of the consumption of the service. As has been stated above the place of

consumption can be located by applying some test to check where the service has produced an

impact. In this case, it clear that the services provided an impact within India b providing the

19

V2(ST)143/A-IV/2013 V2 (ST)169/A-IV/2013 V 2 (ST)202/A-1V/2013

connectivity in the domestic domain as the recipient using the services consumes the mobile

service within India. Further, this Circular also envisages the fact that to attain the status of

export a number of conditions are required to be satisfied which are specified in Rule 3(1) and

Rute 3(2) of Export of Services Rules, 2005. The Circular No.11 1/05/2009-ST explained the

expression "used outside India" only and the other conjunct conditions, as applicable from time

n time also need to be independently satisfied for availing the benefit of an export. In view of

the above, I find that the appellant has not satisfied the conditions for availing the benefit of

export such as — (i) appellant has charged service tax from their clients for export of service i.e.

"International Inbound roaming" service. I also agree with the findings of the adjudicating

authority that appellant has not satisfied the conditions for availing the benefit of export such

as — (i) appellant has charged service tax from their clients for export of service i.e.

"International Inbound roaming" service which is not correct as there is no authority to levy

service tax on export of services. Further, taxable service can be exported on payment of duty

and service tax should be paid and borne by service provider, which is not the case in the

present scenario and (ii) service provider has no authority to collect service tax on export of

services, if service provider collects service tax from the client then he has to pay the same to

Govt. as per section 73A of The Finance Act, 1994. In case of export of services or goods,

exporter is not supposed to charge any duty (Service tax or Excise), however, he can pay duty

on export of goods / services by himself and bear the burden of such duty, than only he can file

rebate claim as per provision. However, in the present case, service provider has not given any

documentary or other evidence to establish that the amount of refund claimed was collected or

paid by them and the incidente of such duty had not been passed on to any other perlon.

Service provider has already issued invoices with service tax and thus they had already charged

service tax from their clients.

•

19. Further, in this context it is also necessary to traverse through the case laws as well

as existing provisions in the commodity laws relating to exports of goods and services. The

Supreme Court, in the case of All India Federation of Tax Practitioners-2007(7) STR 625

20

V2(ST)143/A-IV/2013

V2(ST)169/ATV/2013

V2(ST)202/A-IV/2013

(SC), while. dealing with the legislative competence to levy service tax, held as follows:

"- In the light of what is stated above, it is clear that Service Tax is a TAT which in turn is destination based consumption tax in the sense that it is on commercial activities WO IS 1101 a

charge on the business but on the consumer and it would, logically, be leviable only on services

provided irithin the country. Service tax is a Wilite Chided /Ca. "

20. Thereafter to unravel the nature of the said tax in wider context of the fiscal laws

under the Constitution. The Apex Court applied the principle of equivalence and equated the

production or manufacture of saleable goods with the production of marketable/saleable

services. They said as follows:-

"Amu 34. :Is stated above, service tax is a value added lox. Value addition is on account of the activity like planning, comsultation, advising etc. Ii is cm activity, which provides value (Odiumn as in the rase of manufacturer of goods, which attracts service tax. In the present case, tax falls on the

dc :Rill which is the subject-matter of service tax. In other wordy, we are substituting the word

"service" in place of "goods" by applying the principle of equivalence. Under the Act, the I,nctble Event is each exercise undertaken by the service-provider in ytiving advice on tax

plopping, auditing, costing etc. It is the said principle of equivalence which equates "service lax"

to the (Mural Eve/se Duty. one taxes the provision ofservices and other production of goody "

21. This judgment of the Apex Court gives an interpretation to the statutory

provision on service tax, and needs to be treated as the foundation stone for laying down

any judicial ruling on the subject of nature or location of any service - the criterion that the

taxing event in service tax is an activity and this activity should be assumed to have taken the

form of goods while determining its nature or location.

22 The adjudicating authority under his findings at Para 77 of the impugned order state that the

appellant has already passed on the burden of Service Tax so claimed as rebate to Foreign based

telecom operator (FTO) in this case. The same appears to be unique to the case, as the appellant has

also failed to show it under respective ST-3 returns of the concerned period, as observed by the

adjudicating authority under Para 70 of the impugned order inasmuch as it not upcoming from the

appeal memorandum as to whether did the appellant pay up the Service Tax due on the value of the

so called exptrt of services claimed by the appellant and subsequently claimed rebate of the same.

In fact, it is clear as per Rule 4 of the Export of Services Rules, 2005 that —Any Service, which taxable

21

V2 (ST)143/A-IV/2013 V2 (ST)169/A-IV/2013 V2(ST)202/A-IV013

under clause (105) of Section 65 of the Act may be exported without payment of Service/Tax.

However Rule 5 of the said Rules again provides for the grant of rebate of Service Tax in case the

same is paid by the assessee at the time of exports. In this case, the findings of the adjudicating

authority under Para 77 of the impugned orders continue to remain same at the appellate stage also

as the appellant clearly failed to submit any evidence to establish that the amount of refund claimed

has not been collected by them and any incidence has not been passed onto the foreign buyers

inasmuch as the status of payments received by them from Foreign operators vis-à-vis the element

of Service Tax paid by them on such a value. I therefore, upheld the findings of the adjudicating

authority under Para 77 as one of the reason of the rejection of the rebate claim also.

73. I also find that the appellant has filed rebate claims for earlier period which had been

rejected in the past by the Commissioner (erstwhile Appeals-IV), Ahmedabad and the last one

tq quote is OIA No. 199/2012(STC)AK/Commr.(A)/Ahd dated 3/6.9.2012, wherein the appeal on

rebate of Service Tax on the services provided to Foreign Telecom Operators filed by-the

appellant was rejected. Also the website of CESTAT Ahmedabad reveals that the appellant has

filed appeal against the Order of Commissioner (Appeals) Ahmedabad having No. OIA No.

128/2011(STC)/ K.Anpazhakan/ Commr(A) /Ahd dated 26.5.2011 in CESTAT, Ahmedabad, which

is lying as pending as on date With Honorable CESTAT, Ahmedabad inasmuch as not attained

finality.

74. Coming to the Order of the Honorable CESTAT Mumbai, relied upon by the appellant

passed in case of their group entity under Order No. A/503- 508/13/C STB/C-1 dated 12.3.2013,

I would rely upon the decision of Honorable Supreme Court in case of Collector of Central

I xcise, Vadodara Vs. Dhiren Chemicals reported at 2002 (139) ELT 3 (SC), wherein it has been

clearly stated that once the Ciieulars/Notifications issued by the Board, the same continue to

prvvail and binding upon the Departmental officers. Para 9 of the said decision is reproduced as follows,

22

V2(ST)143/A-IV/2013

V2(ST)169/A-IV/2013

V2(ST)202/A-IV/2013

9. Ire need to made it clear that, regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and

'axioms which place a different interpretation upon the said phrase, that interpretation will

be binding upon the Revenue.

25. In such a case, the Circulars and the Notifications issued and discussed above, in this •

regards, continue to uphold that the services provided to the International Inbound roamers

fail to fall in the category of Export of Services, I would thereby concur with the findings of the

adjudicating authority under the impugned order and thus uphold the rejection of refund claim

filed by the appellant in this regards.

•

In view of my above findings, I thereby uphold the impugned order and thereby

reject the appeals (enumerated under Table at Para 1 above) filed by the appellant. The

appeal filed by the appellant thus stands disposed off in above terms. suot LAASS5.1. o‹...1s-

SUNIL KUMAR SINGI-I)

COMMISSIONER (APPEAL-10

CENTRAL EXCISE, AHMEDABAD.

Arun Jair

SUPLRIN ENDENT (APPEAL-II),

CLNTRAL EXCISE, AHMEDABAD.

r yr

BY R.P.A.D.

M/s Vodafone Essar Gujarat Ltd.

(Now Vodafone West Limited),

Vorlafone House,

Prahladnagar, Off S. G. Highway,

Ahmedabad

23 •

Cody Tot-

1. The Chief Commissioner, Central Excise, Ahmedabad zone, Ahmedabad. 2. The Commissioner, Service Tax, Ahmedabad. 3. The Deputy Commissioner, Service Tax, Division-I, Ahmedabad.

\___9.--T+re Assistant Commissioner, Systems, Service Tax, Ahmedabad 5. Guard File.

• 6. P.A. File. • 7. F. No. V2(ST)143/A-IV/2013

8. F.No.V2(ST)169/A-IV/2013

V2 (ST)143/A-IV/2013 V2 (5T)169/A-IV/2013

V2(ST)202/A-IV/2013

.

.

.

.