Service Tax - Export Rebate - Condition 3 of Notification No. 12/2005 - Impossible to comply with requirement before export - Rebate Allowed - HC
WHAT happens if the conditions of a notification are impossible to comply with?
As per Notification No. 12/2005-S.T dated 19.04.2005, Rebate was granted of the whole of the duty paid on excisable inputs or the whole of the service tax and cess paid on all taxable input services used in providing taxable service exported out of India. Condition 3.1 of the Notification stipulated that:
Filing of declaration. - The provider of taxable service to be exported shall, prior to date of export of taxable service, file a declaration with the jurisdictional Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise, as the case may be, describing the taxable service intended to be exported with,-
(a) description, quantity, value, rate of duty and the amount of duty payable on inputs actually required to be used in providing taxable service to be exported;
(b) description, value and the amount of service tax and cess payable on input services actually required to be used in providing taxable service to be exported.
In a case before the Delhi High Court, the appellant is in the business of rendering IT-enabled services such as technical support services, customer-care services, back-office services etc. which are considered to be “business auxillary services” under the Finance Act, 1994 for the purpose of levy of service tax. The nature of the services is such that they are rendered on a continuous basis without any commencement or terminal points; it is a seamless service. It involves attending to cross-border telephone calls relating to a variety of queries from existing or prospective customers in respect of the products or services of multinational corporations. The appellant's unit in Okhla is one of those places which are popularly known as “Call Centres” - business process outsourcing (BPO) centres. The wealth of skilled, English-speaking, computer-savvy youth in our country are a great source of manpower required by the multinational corporations for such services. The BPO centres become very active from evening because of the time-difference between India and the European and American continents. The mainstay of the call centres is a sophisticated computer system and a technically strong and sophisticated international telephone network. The service consists of providing information relating to the products and services of the MNCs, queries relating to maintenance and after-sales services, providing telephonic assistance in case of glitches during operating the consumer-products or while utilising the services and so on. For instance, the customer sitting in USA has a problem operating a washing machine sold to him by an American company. When he calls the company, the local telephone number would be linked to the call centre number in India and it will actually be an employee of the Indian call centre who would answer the queries and assist the customer in USA get over the problem. Another example could be of a person in USA wanting to book an international air-ticket from an airline; his queries over the phone will be answered by the employee of the Indian call centre, sitting in some place in India. The American manufacturer of the washing machine or the American airline company is the source of revenue for the Indian call centre or BPO centre .
The services rendered by the appellant in its call centre or BPO centre are considered exported, as the services are rendered to persons outside the country.
Now, in this case, it would be impossible for the appellant to furnish prior to date of export of taxable service, the description , value and the amount of service tax and cess payable on input services actually required to be used in providing taxable service to be exported.
The High Court observed, "Any condition imposed by the notification must be capable of being complied with. If it is impossible of compliance, then there is no purpose behind it."
The Deputy Commissioner, Commissioner (Appeals) and Tribunal were unanimous in their view that the requirement, though one of procedure, is nevertheless inflexible as it is conceived with a view to preventing the evasion of service tax and dispensing with the same would deprive the service tax authorities from carrying out the necessary preventive and audit-checks.
But the High Court found it strange that none of the authorities below has demonstrated as to how the appellant could have complied with the requirement prior to the date of the export of the IT-enabled services.
Certainly, Law does not expect you to do the impossible - even if you are an assessee!.
So, the High Court allowed the appeal yesterday.