By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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When services are rendered to a third party at the behest of one’s customer, the service recipient is the customer and not the third party.
Facts: The appellants provided telecom services and entered into agreements with international telecom operators to provide services to the inbound roamers in India. The appellant contended that the service recipients are the international telecom operators and not their subscribers. Further, as the international telecom operators were located outside India and they had received the consideration in convertible foreign exchange, the appellant’s services constituted export of services as the conditions under Rule 3(1)(iii) and Rule 3(2) of the Export of Service Rules, 2005 were satisfied. The Appellants relied on the following:
(i) Case of 2012-TIOL-1877-CESTAT-Del, Paul Merchants Ltd vs. CCE, Chandigarh, wherein it was held that the recipient of service was Western Union and not the persons receiving the money facts of the said case being similar to that of the appellant.
(ii) Circular no.111/5/2009-ST dated 24-02-2009 for the clarification of the expression service provided from India and used outside India and contended that it provided services outside India as the service recipient was located outside India and the benefit of the services provided accrued outside India.
(iii) UK VAT Circular VATPOSS15100, wherein it is stated that place of supply of telecommunication services is where they are used and enjoyed when supplied and when they are provided by a non-EC provider to a UK customer the effective use and enjoyment takes place in UK (such element being subject to UK VAT Act).
The Respondent relied on the Circular No.141/10/2011- TRU dated 13-05-2011 and contended that the accrual of benefit is to be determined on the basis of use and enjoyment of services.
Held:
It was held that the benefit of services accrues to the foreign telecom service provider who is located outside India in view of the Circular No.111/2009-ST dated 24-02-2009. The Hon’ble CESTAT also explained that when an Indian subscriber of MTNL/BSNL goes abroad and uses roaming facility, it is MTNL/BSNL who invoices the subscriber even though the services are provided by foreign telecom service provider. Further, the Hon’ble CESTAT also relied on the decision of Paul Merchants (supra) wherein it was held that the service recipient is the foreign company and not the service recipient. Thus, the services provided by the appellant to foreign telecom services are considered as export of services and no service tax is payable.
