Order date – 20 October 2022

Facts –

• The Appellant, M/s. Zaloni Technologies India Private Limited, a private limited company in India, is engaged in providing data management solutions to Zaloni Inc., a company incorporated in USA vide agreement dated June 15, 2007. The Appellant is exclusively engaged in the export of services under the head “Information Technology Software Services” in terms of Rule 6A of the Service Tax Rules, 1994.
• The appellant has applied for refund of the Cenvat Credit on input services in terms of Rule 5 of the Cenvat Credit Rules, 2004 and the same was rejected on the ground that the services rendered by the Appellant do not meet the criteria under Clause (f) of Rule 6A(1) of the Service Tax Rule inasmuch as it is an overseas branch office of Zaloni Inc. and are merely establishments of distinct persons in accordance with Explanation 3(b) of Section 65B(44) of the Finance Act, 1994.

Issue –

• Whether service rendered by the appellant would qualify Export of services?

Order – 

• The Tribunal relied on the decision of the Hon’ble Gujarat High Courtin the case of Linde Engineering India Pvt.Ltd. Vs. Union of India reported as 2020 (8) TMI 181 – Gujarat High Court wherein was held that a subsidiary and its parent company located in different taxable territories are totally distinct taxpayer (s) or different entities. Further, it is held that under Clause (44) of Section 65B has been considered and it has been held that service provided by a company in India to its Hundred percent holding company abroad cannot be considered as an establishment of a distinct person and therefore such services would be export of services.
• Further, the Appellant received the charges for their services in convertible foreign exchange. Therefore considering the fact that the Appellant and the service recipient are two distinct persons, the service provided by the Appellant to Zaloni Inc., USA clearly falls under the category of export of service.
• Hence the impugned orders are set aside. The Appeals are allowed.