By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Leasing of telecom lines are eligible input services when services are exported electronically.
Prior to 2006, there was no requirement to take input service distributor’s registration.
When data is transmitted electronically, it has to be transferred first to the server of telecom authorities in India and thereafter, it is transmitted to recipient abroad. Though delivery of services is routed through server of telecom authorities in India and is not exported directly, the services are still export of services subject to receipt of payment in convertible foreign exchange.
Facts:
The refund of CENVAT credit was rejected on the grounds that part of CENVAT Credit was distributed by Head Office as input service distributor (ISD) without registration as ISD and that the balance CENVAT credit was disallowed on the ground that services of providing leased telecommunication lines was not eligible input service. Further, the appellants have not directly exported the output services but have routed through telecom authorities located in India and therefore, the definition of export is not satisfied.
The appellants contended that they are eligible for refund as there was no statutory requirement to take ISD registration prior to 2006 and the leased telephone lines were instrumental in exporting output services and therefore, were eligible input services. Even though services were first delivered to telecom authorities in India, it was an essential exercise for processing of data which was required to be transmitted to service recipient abroad for which amount was received in convertible foreign exchange and therefore, the transaction was of export of services only.
Held:
The Tribunal observed that the dedicated lines from office to telecom authorities were essential to export services electronically and therefore, leasing of telecom lines was eligible input service. Prior to 2006, there was no requirement for ISD registration. Accordingly, if input services were used for providing output services, the same would be eligible input services. The view taken by the department, that the output services were not exported since the services were transmitted through telecom service providers in India, was held to be completely irrational. In case of electronic transmission of data, firstly the data has to be transferred to server of telecom authorities in India and thereafter, it is transmitted to abroad service recipient. Since in the present case, the service recipient abroad has received services and payments were made in convertible foreign exchange, the output services were nothing but export of services. However, the appeal was remanded for limited purpose of verification of payments received in convertible foreign exchange at the Head Office situated in other jurisdiction and refund claim was allowed.
