PER S. S. GARG

1. The present appeal is directed against the impugned order dated 02.01.2013 passed by the Commissioner (Appeals) whereby the Commissioner (Appeals) has rejected the appeal filed by the appellant and upheld the order in original.

2. Briefly the facts of the present case are that on an information received that the sub agents of M/s Paul Merchants Limited (in short PML) are not paying service tax on the commission earned by them,enquiries were made from PML. It was found that PML are engaged in the business of „Money Transfer service‟ in pursuance to an agreement with Western Union Financial Services Inc USA who do not have any office in India. Western Union provides money transfer services worlds wide, in association with various primary agents and PML is one of such primary agents. As per the policy of the service, money is remitted to a recipient in India as per instructions of the customer of Western Union located outside of India.

3. The services offered in connection with money transfer service provided by PML are in pursuant to an agreement made with Western Union. M/s PML make payments to the beneficiary themselves through their offices located all over India or through the sub agent appointed by them with the consent of Western Union. For rendering the money transfer service to Western Union, PML gets commission at an agreed rate. This commission is received in India in convertible foreign exchange. In case the payment of beneficiary is made through the sub agents, the commission received from Western Union is shared by PML with their sub agents and payment of commission to sub agents is made in Indian Rupees on monthly basis as per their agreement.

4. In order to conduct further investigations in the matter, PML were asked to supply the details of commission paid to the appellant for the period 01.10.2004 to 31.03.2009. PML vide letter dated 13.08.2009 supplied the detail of commission paid to the appellant. Although the appellant has not provided the copy of the agreement made by them with PML but in general the agreement made with all the sub agents of PML were same.

5. On these allegations, a show cause notice was issued to the appellant demanding service tax of Rs. 75,000/- under Section 73 of the Finance Act, 1994 by invoking extended period of limitation and interest payable thereto demanded under Section 75 of the Finance Act, 1994.

6. After following due process, the Deputy commissioner confirmed the demand along with interest and imposed penalties under Section 76, 77 and 78. Aggrieved by the said order, the appellant filed an appeal before the Ld. Commissioner (Appeals) who rejected their appeal. Hence, the present appeal.

7. None appeared on behalf of the appellant.

8. We have heard the Ld. DR and perused the case records as the issue involved is in a narrow compass, we proceed to decide the matter on merits after examining the records.

9. We find that the only issue involved in the presernt case is whether the appellant is liable to pay service tax under „Business Auxiliary Service‟ or not. This issue is no more res-integra and has been settled by various decisions of the Tribunal in the case of M/s Paul Merchants Ltd. Vs. CCE reported in 2013 (29) STR 255 ( Tri.-Delhi) wherein the Larger Bench has considered this issue in detail and has held as under:-

“(iii) What constitutes export of service is to be determined strictly with reference to the provisions of Export of Services Rules, 2005. Not doing so and leaving this question to be determined by individuals tax payers or tax collectors for each service, based on their deductive ability would result only in utter confusion and chaos.

(iv) Money transfer service is being provided by the Western Union from abroad to their clients who approached their offices or the offices of their agents for remitting money from to friends/relatives in India. The service being provided by the agents and sub-agents is delivery of money to the intended beneficiaries of the customers of WU abroad and this service is “business auxiliary service”, being provided to Western Union. It is Western Union who is the recipient and consumer of this service provided by their agents and sub-agents, not the persons receiving money in India.

(v) The consumer of the service provided by the agents and sub-agents of WU in India is the Western Union, located abroad who use their services for their money transfer business not the persons receiving money in India. Since the service provided is Business Auxiliary Service classifiable under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 2005, and has been provided in relation to business of Western Union located abroad, and the payment for the service has been received in India in convertible foreign currency, the same has to be treated as export of service. It is the person who requested for the service and is liable to make payment for the same who has to be treated as recipient of the service, not the person or persons affected by the performance of the service. Thus, when the person on whose instructions the services in question had been provided by the agents/sub-agents in India and who is liable to make payment for these services, is located abroad, the destination of the services in question has to be treated abroad. The destination has to be decided on the basis of the place of consumption, not the place of performance of service, in the case of this service”.

10. Further this issue has also been considered in the case of Muthoot Fincorp Ltd Vs. CCE, Visakhapatnam reported in 2010 (17) STR 303 (Tri.-Bang.) and Kerala State Financial Enterprises Ltd. Vs. CCE reported in 2011 (24) STR 585 (Tri. Bang.) wherein the Tribunal has observed as under :

“6. It is undisputed that the relation between M/s. Western Union and PML is of money transfer services which is not a taxable service in India. The appellant herein by an agreement with PML has contracted to pay the amount to Indian claimants of the money deposited by their relatives in foreign countries. It is also undisputed that the appellant herein is not charging any amount from the Indian claimants as service charges or any other fee. In the background of this, we find that the order of this Bench in the case of Muthoot FinCorp Ltd. (supra) will squarely cover the issue. We may reproduce the relevant paragraph of the said order.

2. The appellants are non-banking financial company with wide network of branches spanning across Kerala, Tamilnadu, Karnataka, Maharastra and Andhra Pradesh. Appellant entered into an agreement dated 2-11-2002/19- 5-2004 with one M/s. Weizmann Forex Ltd., Cochin (WFL for short) who is an Indian representative of M/s. Western Union Financial Services Inc. (hereinafter called as Western Union). Western Union is a global leader in money transfer and messaging services. WFL is authorized to provide money transfer on behalf of the Western Union in India and also to engaged sub-representatives to offer such services. The appellant herein has been appointed by WFL to provide money transfer and to hold necessary licenses and permits to provide such services. The appellant is given compensation of 50% of the fee received by the WFL for each consumer receive transaction from Western Union. Show cause notices were served upon the appellants for the period 19-5-2004 to 31-1-2006 and 1-7-2003 to 19-5- 2004 demanding Service Tax under the category of business auxiliary service. The allegation in the show cause notice was that the said activity is nothing but promoting the business of WFL. The appellants contested the show cause notices on merits. The adjudicating authority confirmed the demands in the show cause notices vide order-in-originals dated 29-11- 2006 and 29-9-2006. Aggrieved by such orders-in-original, appellants preferred an appeal before CCE (Appeals), Cochin. Ld. Commissioner (Appeals) after hearing and considering the oral and written submissions before him passed an order rejecting the appeal filed by the appellant and upholding the services rendered by the appellant is taxable under business auxiliary services. Hence, these appeals.

3....

5...

6....

7....

8. It can be seen from the above reproduced clauses from the subrepresentation agreement, though the sub-representation agreement is entered between WFL and the appellant, clauses 5, 14 and 15, very clearly indicate the ultimate beneficiary of the entire transaction is Western Union. It is undisputed in this case, that a person approaches Western Union situated outside India for transfer of fund to a beneficiary in India i.e. A person pays money in England to be given to his relative in India, the appellant herein by virtue of sub-representation agreement, arranges to delivery the said money to the beneficiary on verification of identity. It is undisputed that the appellant herein does not charge any amount as commission or fee from the recipients of the amount. The said Western Union charges fee from the person who is situated outside India and pays WFL some amount as commission and WFL pay current appellant a part of the amount as compensation. In the whole transaction it can be seen that the services rendered by the appellant of money transfer is directly to Western Union. If that be so, it can be said that the appellant is providing the services to Western Union whose beneficiaries are outside India.

9. We find that the CBEC vide its circular No. 137/307/2007, dated 24-2- 2009 gave a clarification regarding the applicability of the provisions of the Export of Service Rules, 2005 in certain situations :-

10. It can be seen from the above reproduced clarification that it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefits of these services accrue outside India. It is an admitted fact that the benefits of the services rendered by the appellant are accrued to a person who is situated outside India and to Western Union, who is also situated outside India.”

7. We find, on perusal of the records, and as admitted by the department that the clauses of agreement entered by the appellant herein with M/s. PML are identical to the clauses which were considered by this Bench in the case of M/s. Muthoot Finance Corp’s case. The clauses of agreement/contract in both the cases are similarly worded.

8. Accordingly, in view of the detailed order given by this Bench in the case of Muthoot FinCorp (supra) and facts in the current case being identical as in that case, the impugned order is liable to be set aside and we do so. The impugned order is set aside and appeal is allowed”.

11. In view of our discussion above and by following the ratio of the above said decisions, we hold that the impugned order is not sustainable in law and the same is set aside by allowing the appeal of the appellant with consequential relief, if any, as per law.

12. Dictated and pronounced in the open court