By TIOL News Service

NEW DELHI, MAR 02, 2018: THE appellant is a company incorporated outside India and is engaged in the business of providing money transfer services in various countries including India. Various customers approach the appellant's office in different places abroad for remitting money to their relatives or friends in India. The money and the fee for such remittance are collected abroad by the appellant's office. The customers are provided a unique code. This code is passed on by the customers to the recipient of money in India, who on the basis of this secret code approaches the Indian agent of the appellant. On the basis of submission of the said code, money is given to the recipient.

Thereafter, the Indian agent of the appellant collects the principal money and also commission for such work from the appellant.

The appellant have entered into a Representative Agreement with Post & Telegraph Department of India. As per the agreement, P&T is under obligation to transfer the money to the designated nominee located in India on behalf of the appellant. Such agreements have been entered into by the appellant with various other agents in India. This arrangement is created as the appellant have no persons in India.

The question of service tax liability on this arrangement has been subject matter of dispute.

In respect of some of the agents of the appellant doing identical service in connection with the transfer of money from abroad to India, the service tax liability was examined by the Tribunal. It was held that such services were actually exported to a recipient situated abroad and no tax liability will arise in India.

However, P & T acting as agent of the appellant, in terms of Representative Agreement, paid service tax, allegedly erroneously, and collected the same from the appellant on such services. The said service tax paid by the Department of Post to the Government was in turn re-imbursed /paid by the appellant to the Department of Post. The Department of Post has not preferred any refund claim.

Refund claims filed by the appellant (period May 2006 to February 2009) were rejected by the Original Authority on the ground that the money transfer service is covered under the "Business Auxiliary Service" and service tax has been correctly discharged on the same.

Inasmuch as he held that the Department of Post had made payment to recipient in India on the basis of the instructions of the appellant;that no portion of money transfer service has been performed outside India as claimed by the appellant and accordingly, there is no export of service. Further, the Department of Post had passed on the service tax burden to the appellant and no documentary evidence was submitted to prove otherwise and so the refund is not permitted on the principle of unjust enrichment.

This order was upheld by the Commissioner (Appeals),so the appellant is before the CESTAT.

The appellant submitted that they have identical arrangement with various other agents other than the Department of Post to provide the money transfer service to the recipient in India. That on merit, the issue has been well settled in their favour of the appellant in the following cases -

(a) Paul Merchants Limited and Ors - 2012 -TIOL-1877-CESTAT-DEL

(b) Wall Street India Finance Ltd. - 2014-TIOL-1958-CESTAT-MUM

(c) Muthoot Fincorp. Ltd. - 2009-TIOL-2256-CESTAT-BANG

(d) Bird Travels P.Ltd. - 2016-TIOL-2303-CESTAT-DEL

(e) Airbus Group India P. Ltd. - 2016-TIOL-2312-CESTAT-DEL

It is further submitted that the SCN proposed rejection of the refund claim only on the grounds of no-export of service and time bar; the question of unjust enrichment was not at all raised, hence, it is not open to the lower authorities to proceed on a fresh ground in adjudication. So also, the doctrine of unjust enrichment had no application in respect of refund claims involving export of services. [Pulcra Chemicals (India) Pvt. Ltd. - 2015-TIOL-915-CESTAT-MUM, Vodafone Cellular Ltd. - 2014-TIOL-319-CESTAT-MUM, M/s. Mohanlal Services - 2009-TIOL-2068-CESTAT-AHM relied upon]

The Bench considered the submissions and observed thus -

On Merits:

++ The tax liability of such services has been a subject matter of various decisions by the Tribunal. Dealing with one of the agents of the appellant engaged in transfer of money from abroad to a person in India, the Tribunal in the case of Wall Street Finance Ltd - 2014-TIOL-1958-CESTAT-MUM has observed as below:-

"5.1 … In the facts of the case before us, the service receiver is M/s. Western Union, who has paid the consideration for the service and who is situated outside India and therefore, the place of provision of service should be treated as falling outside India.

5.2 In an identical set of facts in the case of Paul Merchants Ltd. (supra) and Fine Forex Pvt. Ltd. (supra), this Tribunal held that the transaction would amount to export of service and hence no Service Tax would be leviable. Following the ratio of these decisions and applying the same to the facts of the case before us, we are of the view that the services undertaken by the appellant to Western Union amounts to export of service and hence, not taxable in India."

++ In the present case, the Department of Post is rendering service to the appellant by executing the remittance of foreign exchange to the intended recipient in India. For this, they are receiving the considerations from the appellant. The services are availed by the appellant, who is a foreign based entity. This is to be considered as export of service as held by the Tribunal in various cases.

++ The Department of Post is not rendering any taxable service in India in the present arrangement. The recipient of service is not the recipient of transferred money in India. He did not pay any consideration for such receipt facilitated by the Department of Post. As such, we hold that the lower authorities have fallen in error in holding that the services in dispute are not exported.

On Unjust enrichment:

++ Appellant raised a preliminary objection against the order of the lower authorities on the ground that this was never alleged in the show cause notice proposing rejection of the refund claims. We are not convinced by the said technical objection.

++ Though the Original as well as the first Appellate Authority rejected the claims on merit, they also gave a finding on the question of unjust enrichment. The lower authorities are bound to examine the statutory requirements of such principle before actually sanctioning the amount to the claimant. There is no infirmity in scrutiny. The correctness of the findings can be contested.

++ The appellants have categorically submitted that their customers, who approached them to remit foreign exchange from outside the country to a recipient in India, do not pay any consideration, which can be directly or indirectly attributable to service tax. This, they have established by directly as well as by inference. Supporting certificate from Chartered Accountant, who examined their business arrangement and accounting has also been submitted. As such, the appellants have discharged their liability to state that they have not passed on any tax burden to any third party in the present dispute.

++ The Tribunal in Pulcra Chemicals (India) Pvt. Ltd. (supra), Vodafone Cellular Ltd. (supra) and M/s. Mohanlal Services (supra) held that with reference to refund claims relating to export of services the principle of unjust enrichment would not be applicable as provided in Section 11 B of the Central Excise Act, 1994.

Concluding that the impugned orders denying refund claimed by the appellants are not sustainable, the same were set aside and the appeals were allowed with consequential relief.

(See 2018-TIOL-719-CESTAT-DEL)