AUTHORITY FOR ADVANCE RULINGS
(CUSTOMS, CENTRAL EXCISE & SERVICE TAX)
NEW DELHI

CORAM

O R D E R
( Per Dr. Brahm Avtar Agrawal )

          The prime point to  ponder in the  instant application  for advance ruling under  sub-section (1) of section 96C of the  Finance Act, 1994, made  by  one Mr  Jason  James Clemens,  a  British  national of  foreign Origin and "non-resident", is as to whether the questions stated by the applicant  fall within the jurisdiction of the Authority, vide sub-section

(2) of the said section, and  hasarisen in the backcloth painted in the following sub-paras.

1.2 The applicant proposes to set up an international call centre in India in collaboration with "Gemini  Pacific    Group LLC", an American  company  formed under the   "Limited  Liability  Company  Law of the State of Delaware".

1.3 It has been submitted on behalf of the applicant that the main business activity   of the proposed international call centre would be to sell  various products manufactured by the producers of foreign countries to  the potential customers throughout Europe and Asia excluding India.  Telephone enquiries will be made from the potential customers outside India and on procurement of  orders the same will be forwarded to the  producers/sellers of goods in foreign countries. The   manufacturer/supplier/seller in foreign countries will directly dispatch goods to such customers.  The applicant will be end for service charges on orders so booked and executed.  The entire service charges will be remitted in India in   convertible foreign  currencies.  The services provided by the applicant       would constitute the export of services and the same, as submitted by the applicant, "shall be exempt from the levy of service tax".

1.4 It has been further submitted that in order to render the services of the proposed call centre, he will be availing of the services of local telephone operators, who  would  raise bills upon the applicant and the bills will include service tax.  While  the services of  the local telephone operators would  be the  major secondary services, the applicant will also be availing of other services such as consultancy/engineering  services,  on  which  service  tax  is  leviable.  The applicant  has stated that he, as an exporter of services and a primary service provider, will be availing of various secondary services, which will ultimately get  consumed/merged  with the services being exported and, therefore, service tax should not be levied on such secondary services.

1.5 The applicant has in support of his submissions relied on the Notification No. 8/2003-ST dated 20.06.2003 issued by the Central Government and the Circular No. 56/5/2003 dated 25.04.2003, issued by the Central Board of Excise and Customs ("Board").  They read as under:

"Notification No. 8/2003-ST[F.No. B3/7/2003-TRU], dated 20-6-2003

In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is  necessary in the public interest so to do, hereby exempts the taxable services provided, by a call centre or a medical transcription centre, to a  client from the whole of the service tax leviable thereon under sub-section (2) of section    66 of the said Act.
 

Explanation.-  For the purposes of this notification,-

(i)  "call centre" means a commercial concern which provides assistance, help or information, through telephone, on behalf of another person;

(ii) "medical transcription centre" means a commercial concern      which   transcribes medical history, treatment, medical observations and the like.

2. This notification shall come into force on the 1^st day of July, 2003."

"Circular No. 56/5/2003[F.No.254/1/2003-CX-4], dated 25-4-2003

The Central Government has issued Notification No. 2/2003, dated 1-3-2003 in the        current years budget rescinding the  earlier Notification No. 6/99-Service Tax, dated 9-4-1999, which exempted taxable services from         payment of service tax so long as payment for services rendered             is received in convertible foreign exchange,     which is not repatriated outside India. Consequent  to the issue of Notification no. 2/2003 cited above, service tax would be leviable on all taxable services consumed or rendered in India,          irrespective of whether the payment thereof is received in foreign exchange or not.

2.    In this regard various representations have been received by the Board  raising apprehension that because of the withdrawal of the notification No. 6/99, export of service would be       affected as it would be costlier in the international markets.

3.     The Board has examined the issue.  In this connection I am directed to clarify that the Service Tax is destination-based consumption tax and it is not applicable on export of services.  Export of services would continue to remain tax-free even after withdrawal of notification No. 6/99 dated 9-4-1999.  Further it   is clarified that service consumed/provided in India in the manufacture of goods which are ultimately exported, no credit   of service tax can be availed or reimbursed at present as intersectoral tax credit between services and goods are not allowed.

4.     Another question raised is about the taxability of secondary services, which are used by the primary service provider for the export of services.  Since the secondary service ultimately gets consumed/merged with the services that are being exported no service tax would be leviable on such secondary services.  However in case where the secondary service gets consumed in part or toto for providing service in India, the service tax would be leviable on the secondary service provider.  For this purpose both primary and secondary service providers would maintain the record deemed fit by them to identify the secondary services with services that are being exported.                              .............................. "

1.6 The applicant mainly relies on para 4 of the above-quoted Circular, which provides, inter alia, that no service tax would be leviable on the secondary services , which ultimately get consumed/merged with the primary services that are being exported.

1.7 In the comments furnished on behalf          of the Commissioner, the plea of the applicant is affirmed stating that  "it appears that services exported by the said party are exempt from service tax and secondary services used in the primary services exported are also not chargeable to service tax, provided records are being maintained by the primary and secondary service provider to identify the secondary services with the services being exported", vide the letter No. CE/ST/DL.II/Tech./Misc/04/455 dated 14.09.2004 written by the Deputy Commissioner, Service tax, Delhi-II.

1.8 The questions framed by the applicant seeking advance ruling from the Authority read as under :-

"(i)  Whether the service tax in first instance is chargeable by  the secondary service provider towards the services to          international Call Centre (primary service providers)  which services constitute 100% exports.If ruling by the Hon'ble Court on above question is Yes, then, the further question for Advance Ruling before the Hon'ble Bench is placed as under :-

(ii)  Whether the service tax paid  by the primary service provider dealing in 100% export of services, on the bills raised       by the secondary service provider, would be end for refund, if yes, how and in which manner?

AND

(iii)  Whether the refund of service tax paid on secondary services by the primary service     provider of 100%  exports of services would also en the primary service provider for  interest/any other compensation on such amount, which prima-facie was not payable."

2.  The jurisdiction of the Authority to pronounce its advance ruling is circumscribed by sub-section (2) of section 96C of the Finance Act, 1994, in that the advance ruling can be sought only on questions of the kinds listed therein.  Only if the questions raised by the applicant are covered under the said provision, the stage of pronouncing an advance ruling by the Authority would arise.  In fact, we have stated in our Order No.1/2004 dated  16.09.2004 in the instant application that the question as to whether the aforesaid Circular will fall within the meaning of the word "notification" in clause (d) of sub-section (2) of section 96C of the Finance Act shall be considered at the time of hearing.

3. Sub-section (2) of section 96C of the Finance Act, 1994 reads as under :-
 

"The  question on which the advance ruling is sought shall  be in respect of,-

(a)  classification of any service as a taxable service under Chapter V;
(b)   the valuation of taxable services for charging service tax;
(c)  the   principles to be adopted for the purposes of determination of value of the taxable service under the provisions  of Chapter V;   

(d)   applicability of notifications issued under Chapter V;
(e)  admissibility of credit of service tax."

4.  As the applicant has confined his         reliance to clauses (d) and (e), we shall only consider as to whether the questions stated by the applicant are covered under any of the said clauses.
 

5. The plea that the secondary services which get consumed/merged in the primary services exported by an international call centre should be exempt from service tax is exclusively based on the above-quoted         Circular dated 25.04.2003 and no statutory provision or notification issued under section 93 of the Finance Act, 1994, has been pointed  out in support of the said plea.  The Notification dated 20.06.2003 is not relevant to the issue of the exicibility of the secondary services to service tax.

6. It needs no elaborate reasoning to conclude that the circular issued by the Board cannot be termed as a notification issued under Chapter V of the Finance Act, 1994, the subject-matter of clause (d).  Chapter V of the Finance Act, 1994 contains 30 sections:  sections 64  to 96; section 83 makes applicable in relation to service tax certain provisions of the Central Excise Act, 1944; section 12 of the Central Excise Act, 1944, through a Central Government's notification, in  turn  makes applicable in relation to service tax certain provisions of the Customs Act, 1962.  Out of the provisions made applicable in relation to service tax, sections 68 (2), 75 and 93 of the Finance Act, 1994, sections 11B (2) & (5),  11BB, 11C, 12, 37A of the Central Excise Act, 1944 and section 110 (1A) of the Customs Act, 1962 mention about notifications dealing with different matters, but the power to issue notifications under the said sections falling in   Chapter V has been conferred on the Central Government only.  None of those provisions is attracted vis-a-vis the Board's Circular under consideration.  The power to issue circulars is conferred on the Board under section 37B of the Central Excise Act, 1944, as made applicable by virtue of section 83 of the Finance Act, 1994, which also falls under Chapter V.   However, the Legislature chose to prescribe only notifications and not circulars in section 96C (2) (d) of the Finance Act, 1994.  Therefore, reliance on clause (d), in our view, is misplaced.

7. The applicant's reliance on  clause (e) is not in order, as none of the questions raised by the applicant relate to "credit" of service tax, which is a concept different from "refund".   Moreover, the subsequent two questions stated by the applicant, which mention about refund, are simply  dependent on an expected affirmative answer from the Authority on the first question raised by the applicant.  In view of our conclusion in regard to clause (d), reliance on clause (e) also is out of place.

8.  In the light of the above, we are of the view that the questions raised by the applicant are not covered         under sub-section (2) of section 96C of the Finance Act, 1994.  Thus, the stage of pronouncing an advance ruling is not reached in the instant case.

9. Accordingly, in partial modification of our Order of September 16, 2004, the application is rejected.

Pronounced in the open court on the 30^th day of November 2004 .

F.No. AAR/44/105/2004/1014                                        
Dated : 30^th November 2004