Rakesh Kumar, J.

1. The appellant are a company registered in India and are subsidiary of M/s GAP International Sourcing, Inc., U.S.A. who are a prominent retailer in U.S.A. and other countries. The appellant entered into a service support agreement with M/s GAP, U.S.A. for rendering various services relating to procurement of goods recommending fabrics to be used for manufacture of garments, recommending vendors from which fabrics, yarn, zippers, buttons, snap fasteners etc. can be procured, reporting the status of manufacture of products by the chosen vendors, analyzing the reports of the samples sent by the vendors, giving recommendation about the product integrity, inspecting export consignments and issuing inspection certificates, screening the vendors suitability in terms of child labour norms and pollution control norms and recommending the teams to be engaged in logistic work like transportation, clearing and forwarding etc. for export of the purchased products out of India. The department was of the view that the services being rendered by the appellant are Business Auxiliary Service covered by Section 65 (105) (zzb) readwith Section 65 (19) of the Finance Act, 1994. However, the Department was of the view that since the service has been rendered in India and is not export of service in terms of Export of Service Rules, 2005, the appellant would be liable to pay service tax in respect of the same. There is no dispute that the appellant for providing the above mentioned services to M/s GAP, U.S.A. received the remuneration from them in convertible foreign exchange. The dispute is only on the point as to whether the services provided by the appellant are export of service or not. After issue of show cause notice dated 10/01/08, the Jurisdictional Commissioner vide order-in-original dated 01/9/08 confirmed the service tax demand of Rs. 5,66,98,112/- alongwith education cess for the period from 19/4/06 to 31/5/07 and also the interest thereon under Section 75 of the Finance Act, 1994 and beside this, imposed penalty of Rs. 5,66,98,112/- on the appellant under Section 78 and also the penalty of Rs. 1,000/- under Section 77. Against this order of the Commissioner, the present appeal has been filed.

2. Heard both the sides.

3. Shri N. Venkataraman, Senior Advocate alongwith Shri Dheeraj Srivastava, Advocate and Ms. K.G. Rajeshwari, Advocate, the learned Counsels for the appellant, pleaded that the service in relation to procurement of goods being provided by the appellant is Business Auxiliary Service covered by Section 65 (105) (zzb) readwith Section 65 (19) of the Finance Act, 1994, that this service is being provided by the appellant to M/s GAP, U.S.A. in terms of their agreement with them, that the appellant received the payment for the services from the M/s GAP, U.S.A. in convertible foreign exchange, that these services are in relation to Business or Commerce, and the same having been used by M/s GAP, U.S.A. in relation to their business located abroad, have to be treated as export of service in terms of Rule 3 (1) (iii) readwith Rule 3 (2) of the Export of Service Rules, 2005 as M/s GAP, U.S.A. do not have any establishment or branch in India and the service being received by them from the appellant are meant for and have been used in their business located abroad, that the services provided by the appellant cannot be treated as having been received and consumed in India, that the issue involved in this case is squarely covered by the judgment of the Tribunal in the case of Paul Merchants Ltd. & Ors. vs. CCE reported in 2012 (TIOL) 1877 (CESTAT Del.), and that in view of this, the impugned order is not sustainable.

4. Shri Amresh Jain, the learned DR, defended the impugned order and made oral as well as written submissions. The written submissions which include the submissions made in course of hearing are reproduced below :

1. The show cause notice has been issued for the period from 19.04.06 to 31.5.07. During the relevant period the law relating to export was specified in the Export of Service Rules, 2005. The specified service(BAS) was covered under Rule 3(1)(iii). The said sub Rule provided the following conditions for this service in order to constitute as export:

From 19.04.06 to 28.02.2007:

(i). Recipient should be located outside India

(ii). Such service is delivered outside India and used outside India and

(iii). Payment for such service provided outside India is received by the service provider in convertible foreign exchange.

From 01.03.2007 to 31.05.07:

While condition number (i) and (iii), as mentioned above, remained same the condition number (ii) was revised as follows:

(ii).Such service is provide from India and used outside India and

In other words the difference incorporated w.e.f. 01.03.07 was that the words delivered outside India were deleted from condition number (ii) and replaced with the words provided from India. However the requirement that service should be used outside India coupled with the requirement that the service should be provided outside India remained unchanged.

2. The expression delivered outside India and used outside India were akin to consumption as inferred from the Departments Circular B.1/4/2006 TRU dated 19.04.06 (Para 4.3.6, copy enclosed) which states as under:

Services consumed within India do not fall with the scope of Export of service

3. The Rules clearly specify two separate conditions i.e. the user should be located outside India and the use should also be outside India. These conditions have to be satisfied independently of each other. If the Noticees explanation were to be accepted, a mere change in location of the recipient will also lead to change in the place of use of service. For example, if in this case the recipient were to be relocated from USA to say Japan, in terms of the Noticees logic, the place of use of service will stand automatically shifted from USA to Japan. There is no effort made in the submissions to draw the distinction and establish independently where the services are being provided and used. If the mere location of the recipient was to determine the place of use, it will open innumerable loopholes of misuse whereby services meant to be used in India would be merely routed through a foreign recipient.

4. The services involved in this case are by way of Support Services for sourcing of garments for GAP International. This comprises a host of services e.g. vendor development merchandising, product integrity, vendor compliance, quality assurance, fabric sourcing and logistics support etc. Much of this is accomplished by way of identifying and developing vendors capable of meeting stringent norms of GAP International regarding production of the garments, having the capacity to handle the volumes and adhere to the production schedules demanded by the buyers. This is accomplished by conducting regular quality checks at the premises of the vendors, ensuring that the vendors comply with the production schedules, or providing the logistic support which involves physical effort together with professional expertise of a fairly high order to ensure that the garment shipments are exported in time. These services once provided are not capable of being used in a territory other than where they have been provided. In fact most of the time provision and use is happening simultaneously. It will be naove to even conceive that the services of Merchandising, Product integrity, Vendor Compliance, quality assurance, Fabric sourcing and Logistics support etc provided in Indian can even be used remotely in a territory other than where these have been provided. In fact, it is not uncommon for corporate to emphasize the local expertise in the recruitment of various staff deployed for the provision of these services in terms of their proficiency in local knowledge, customs and/or traditions etc.

5. Distinction needs to be and must be drawn amongst the words user beneficiary and buyer/payer f a service. While many a times they are same, they may not be so in all the cases. The benefits in this case would definitely flow to GAP International but that does not mean that service has been used outside India. This will be clear from the following diagram:

USER In India Outside India Use In India

1. (Taxable)

2. (Taxable)

Outside India

3. (Taxable)

4. (Export)

It is only in situation 4 (subject to meeting other conditions) that the conditions of export are satisfied. It is inconceivable to imagine how Logistic Support Services can be rendered in India and used elsewhere. Each of these services involves considerable physical execution that can not be provided outside India or used outside. These are not mere advisory services whereby an opinion or a report is sent abroad. Gap International is in the business of sourcing garments from India which are sold abroad. It is an important pre-requisite for the business to source garments that meet the stringent quality standard and are sourced at the best prices and shipped in time to meet the fairly exacting standards. These services are continuously being provided when the various shipments are sent. Merely, because the payments are being received from overseas does not mean that the services have been used in a place outside India. If Gap International were to even try using these services in a place outside India. If Gap International were to even try using these services in a place other that India, it will not be physically possible.

6. Whether Accrual of benefit of service is only to the person who pays for it

As per Circular No. 141/10/2011-TRU dt. 13.5.2011 it may be noted that the words accrual of benefit are not restricted to mere impact on the bottom-line of the person who pays for the service. If that were the intention it would render the requirement of services being used outside India during the period prior to 28-2-2010 in fructuous. These words should be given a harmonious interpretation keeping in view that during the period upto 27.2.2010 the explicit condition was provided in the rule that the service should be used outside India. In other words these words may be interpreted in the context where the effective use and enjoyment of the service has been obtained. The effective use and enjoyment of the service will of course depend on the nature of the service. For example effective use of advertising services shall be the place where the advertising material is disseminated to the audience though actually the benefit may finally accrue to the buyer who is located at another place.

7. Whether the Routing of payment for a service determines the place of consumption of service

Routing of payment for a service cannot determine where the service was consumed. As an illustration, if a ward or a person attends coaching classes in Delhi but the guardian makes the payment from his work station abroad, in such a case it would be absurd to say that the ward has not consumed the services but by some fantastic imagination, the consumption should be treated as having been made by the guardian abroad. This kind of logic can lead to peculiar results of raising demand on every person who sends remittance from India to a foreign country for enjoying a service in a foreign territory.

The business support service is a performance based service and the event of taxation is the physical performance by the service provider. Services, and especially those that are based on performance, cannot be stored as they do not have any shelf life. The provision of service and the consumption of the service are simultaneous. As in the case of coaching service, in the case of business support service too, the service provider performs in India by approaching prospective clients to enter into a business relationship with the foreign entity. The service provident by such performance gets consumed the moment the prospective clients in India are informed of the business relationship that he could possibly have with the foreign entity. This business support service therefore essentially comprises in preparing Indian clients to enter into business relationship with the foreign entity. It is quite analogues to coaching class service where tutors in a class room teach, or prepare through trial test, the students for appearing in a competitive exam, to enable the students to gain entry in to an education institution or a profession.

In the case of coaching service, it would be ridiculous to claim that the guardian of the students has consumed the service even though he may have paid the coaching service providers in foreign exchange from a foreign location. Similarly, it is not material whether the payment for business support service has been received by the appellants from an entity abroad or form the Indian clients he approached. If the business transactions are analyzed it would be seen that the appellant actually receives his payments from the revenue generated by the foreign entity from the business that is developed by the appellant in India. Though, banking transaction may show a movement of funds from foreign entity to the appellant, in business economics, the money that accrues to the appellant is a portion of the money spent by India clients that they transit business with the foreign entity.

As an illustration, if a person, who is a member of a club in New York, allows his daughter to use the club service in New York and pays the charges from his residence in Bangalore. The consumption club service in New York would then become leviable to service tax in India. Such a construction is unreal as the Service Tax is destination based tax in the sense that it is levied on commercial activities and it is not a charge on the business but on the consumer. The activity of sale, promotion, sales supports etc., in the instant case have been performed and consumed in taxable territory and hence the services are taxable in India.

5. We have considered the submissions from both the sides and perused the records.

6. The service provided by the appellant to M/s GAP, U.S.A., is in relation to procurement of goods from India. For this purpose, the appellant conduct the survey of the manufacturers of various products required by M/s GAP, U.S.A., and recommend the vendors who can supply the goods of the desired quality. They also conduct inspection of the export consignments and issue inspection certificates. In selecting the vendors they also examine not only the quality of their products, but also whether they conform to child labour norms, Pollution control norms etc. as compliance with these norms is important for their Principals. They also recommend the Transporters and logistic service providers for export of the products purchased. Thus, the services being provided by the appellant to their principal are the services in relation to procurement of the goods and there is no dispute that these services are Business Auxiliary Services covered by Section 65 (105) (zzb) readwith Section 65 (19) of the Finance Act, 1994. The only point of dispute is as to whether the services are taxable in India or the same are export of service outside India in terms of Service Rules, 2005 and for this reason are not taxable in India. Though the services have been performed in India, these services being Business Auxiliary Services are in respect of the business of the appellants principal located abroad. The services being provided by the appellant are obviously meant for and are used by M/s GAP, U.S.A. for their business. The services being provided by the appellant are covered by Clause (iii) of Rule 3 (1) of Export Service Rules, 2005, as these services are in relation to business or commerce and in terms of this clause, read with sub-rule (2) of Rule 3, these services would be treated as exported out of India if the recipient is located outside India and the same have been delivered outside India and used India and payment for the same has been received by the service provided in convertible foreign exchange. There is no dispute that the payment for these services has been received in convertible foreign exchange and the payment has been made by M/s GAP, U.S.A. located abroad, not having any establishment or branch in India. The departments contention, however, is that the conditions of delivery outside India and use outside India are not satisfied, as the services have been performed in India and the same are not capable of being used in territory other than the place where the same have been provided. According to the department most of the time, the provision and use of the services is happening simultaneously and it would be to naive to even conceive that services of merchandising, product integrity, vendor compliance, quality assurance, fabric sourcing and logistic support etc. provided in India can even be used remotely in a territory other than where the same have been provided. It has been pleaded that if M/s GAP, U.S.A. were even to try using these services in a place other than India, it will not be physically possible. It has also been pleaded that routing if payment for a service cannot determine the place of consumption.

7. In our view the arguments of the department are absurd as the DR has not mentioned as to who is the consumer of the services in India, if the services, in question, provided in India by the appellant have not been used and consumed by their principal in U.S.A. When the appellant identify the vendors for their principal abroad on the basis of the quality of their products, their manufacturing infrastructure, compliance with child labour laws and pollution control norms and also provide the services of inspection of the export consignments, besides identifying the logistic service providers for smooth transportation of the goods purchased to the port for their export, the user and beneficiary of all these services is their principal abroad. It would be absurd to say that the recipient and user of these services are the persons in India and not M/s GAP, U.S.A. for whom all these services provided by the appellant are meant, who have used these services for their business and have made payment for these service in convertible foreign exchange.

8. The learned DR relies upon the Boards Circular No. 141/ 10/2011-TRU dated 13/05/11. This Circular had been issued in the context that since by Notification No. 6/2010-ST dated 27/2/10, Rule 3 (2) of the Export of Service Rules, 2005 has been amended and clause (a) of Rule 3 (2) regarding use of the service being outside India has been deleted, during the period prior to 27/2/10, the condition of use outside India also needs to be satisfied for availing the benefit of export. On the point of the condition regarding use outside India, an earlier Circular No. 111/5/09 dated 24/2/09 had clarified as under.

For the services that fall under category III [Rule 3 (1) (iii)], the relevant factor is the location of the service receiver and not the place of performance. In this context, the phrase used outside India is to be interpreted to mean that the benefit of the service should accrue outside India. Thus, for category III services [Rule 3 (1) (iii)], it is possible that export of service may take place even when all the relevant activities take place in India so long as the benefit of these services accrues outside India. In all the illustrations mentioned in the opening paragraph, what is accruing outside India is the benefit in terms of promotion of business of a foreign company. Similar would be the treatment of other category III [Rule 3 (1) (iii)] services as well.

First paragraph of this Circular, among other examples, mentioned

Indian agents who undertake marketing in India of goods of a foreign seller. In this case, the agent undertakes all activities within India and receives commission for his services from foreign seller in convertible foreign exchange

Circular 141/10/2011 dated 13/5/2011 without superseding the Circular No. 111/5/09-ST dated 24/2/09 further clarifies that

(i). the words accrual of benefit are not restricted to mere impact on the bottom line of the person who pays for the service ; and

(ii). these words may be interpreted in the context where effective use and enjoyment of the service has been obtained, which will depend upon the nature of the service and that effective use of advertising service shall be at the place where the advertising material is disseminated to the audience, though actually the benefit may finally occur to the buyer who is located at another place.

8.1 Apex court, in the cases of All India Federation of Tax Practitioners reported in (2007) 7 SCC 527 = (2007 TIOL 149 SC ST) and Association of Leasing and Financial Service Companies reported in 2010 TIOL 87 SC ST LB, has held that

(i). service tax is a value added tax which in turn is a destination based consumption tax in the sense that it is levied on commercial activities and it is not a charge on business but on the consumer;

(ii). Value addition is on account of the activity which provides value addition; and

(iii). Service tax is an economic concept based on the principle of equivalence in the sense that consumption of goods and consumption of services are similar, as they both satisfactory human needs.

The important points emphasized in these judgments are that service tax, though levied on commercial activities, is a destination based consumption tax and that it is not a charge or business but on the consumer. Therefore when the service provided by a person in India is consumed and used by a person abroad, it is treated as export and is not taxed in India as the destination of the service provided and its use is outside India. In a reverse case, when the service provided by a person from outside India, is consumed and used by a person in India, it is taxed in India under reverse charge mechanism of Section 66A of the Finance Act, 1994. Thus the scheme of levy of service tax according to which (a). when the service provider and service receiver, both, are in India, service tax is charged in India from the service provider;

(b). when service provider is in India and service recipient is located abroad, no service tax is charged from the service provider, and

(c). when service provider is abroad, not having any establishment or branch in India, and the service recipient is in India, service tax is charged from the service recipient under reverse charge mechanism; is in accordance with the principle laid down by the Apex court that service tax is a destination based tax on consumption. In this regard, service tax is similar to other indirect taxes like central excise and customs duties, as central excise duties or import duties paid on the goods are refunded as drawback or export rebate on export of the goods out of India. Since unlike goods, where a person may purchase and receive some goods, store them and thereafter sell the goods to some other person who may consume those goods to satisfy his need, in case of service, receipt and consumption takes place simultaneously, the person receiving the service is also the person consuming the same or using the same. Though Rule 3 (2) of Export of Service Rules during period till 01/3/07 used the word delivery of service outside India, in view of intangible nature of services, these words should be construed as receipt of service outside India, which, as explained above, is the same as consumption outside India or use outside India. Thus, in context of service, the receipt, consumption and delivery of the service is the same and accordingly the place of consumption and, hence, the place of taxation, would be the same as the place of receipt of service.

8.2.Since unlike goods, the services are intangible and can be provided by more than one mode and place of performance cannot be uniformally adopted as the criteria for determining the place of receipt/consumption of services, as services in relation to business like consultancy service provided by a person in India can be received by and used by a person abroad for his business, without the service recipient having to come to India, and since because of complexity of service transactions and different nature of different services, the question of determining place of receipt/consumption cannot be left to the deductive abilities of an individual tax assessing officer, the Government for smooth service tax administration has framed Export of Service Rules, 2005 and Taxation of Services (provided from outside India and received in India) Rules, 2006, which put together, are basically the rules for determining the place of receipt (which is same as the place of consumption) i.e. for determining whether a particular service provided from outside India by an offshore service provider, not having any branch or establishment in India, has been received in India and hence is taxable in India under reverse charge mechanism or whether a service provided in India has been received/consumed outside India and, hence, is not taxable in India. In fact the Export of Service Rules, 2005 and Taxation of Services (provided from outside India and received in India) Rules, 2006, have, in the budget of 2012-13, been replaced by the Place of Provision of Services Rules, 2012, the Rule 3 of which states that the place of provision of a service shall be the place of service receiver (who is the service consumer).

8.2.1. Under Export of Service Rules, 2005 and Taxation of Services (provided from outside India and received in India) Rules, 2006, for the purpose of determining whether a service provided in India has been exported out of India i.e. has been received/consumed outside India or whether a service provided from outside India by an offshore service provider has been received/consumed by a person in India, the services have been divided into three categories

(i). Services in relation to immovable property as specified in these rules, which are treated as exported if the services provided from India are in relation to an immovable property located outside India and payment has been received in foreign exchange and such services when provided from outside India are treated as received in India if the same are in respect of an immovable property located in India;

(ii). performance based services, as specified in these rules, which are treated as exported if the same have been performed outside India, either in full or even partly; and payment has been received in convertible foreign exchange and such services, when provided by an offshore service provider are treated as received in India, if the same have been performed in India either in full or even partly; and

(iii). Services in relation to business or commerce as specified in these rules, which are treated as exported, when the same have been provided in relation to business or commerce to a recipient located outside India and payment for the service has been received in foreign exchange and in case of such services are provided by an offshore service provider, the same are treated as received in India if the same have been received by a recipient located in India for use in relation to business or commerce.

8.2.2. There is little scope for confusion in respect of the services in relation to immovable property or performance based service for determining whether the same have been exported or imported. Confusion arises in case of services in relation to business or commerce covered by Rule 3 (1) (iii) of Export of Service Rules, 2005 and Rule 3 (1) (iii) of Taxation of Service (provided from outside India and received in India) Rules, 2006, in respect of which, for export of service, the service should have been provided in relation to business or commerce to recipient located outside India and for import of service into India, the service provided from outside India should have been received by a recipient located in India for use in relation to business or commerce. The term recipient of service is not defined in Finance Act, 1994 or in the rules made thereunder.

8.3. Though the term recipient in respect of a service is not defined in the Finance Act, 1994 or in the rules made thereunder, the gap has to be filled by construction and on the analogy of the transaction of sale of goods, the service recipient in a transaction of the provision of service, has to be treated as the person.

(a). on whose instructions the service has been provided and who is obliged to make payment for the provision of service; and

(b). whose need is satisfied by the provision of service it may be his personal need or the need of his business or need to meet some obligation to some person.

Since service is normally an activity performed by a person A for some other person B for some consideration and this activity by A may affect some other persons C, D and E in some manner, good or bad, the persons C, D and E are the person affected by the service, they cannot be treated as service recipient the service recipient would be B who has paid for the service and whose need has been satisfied by the provision of service. The only situation where in respect of some service provided by A which was ordered and paid for by B, a person C who has benefited from the service, can be treated as service recipient, when B has acted purely as an agent of C. Therefore in respect of services covered by Rule 3 (1) (iii) of the Export of Service Rules, 2005, which are the service in relation to business or commerce, the same provided by a person in India for use in relation to business or commerce would be treated received outside India and hence, exported, if (i). the services have been provided on the instruction of a person located outside India for use in his business;

(ii).payment for those services has been made by him in convertible foreign exchange and it is he who has used the service to satisfy the need of his business.

It would be absolutely wrong to say that the services like advertisement, publicity, marketing etc. provided by a person in India on the instructions of a corporation located outside India for use in its business and the payment for which has been made by that corporation located outside India, have been received/consumed in India, just because the same have been performed in India.

8.4.Thus the Export of Service Rules, 2005 and Taxation of Service (provided from outside India and received in India) Rules, 2006, readwith Section 66A of the Finance Act, 1994 are fully in accordance with the law laid down by the Apex Court in case of All India Federation of Tax Practitioners (supra) and Association of Leasing and Financial Service Companies (supra) that service tax is a value added tax, which, in turn, is a destination based consumption tax in the sense that it is not a charge on business but is a charge on the consumer. Therefore what constitutes export of service has to be decided strictly in accordance with the provisions of Export of Service Rules, 2005 and for this purpose, in case of services in relation to business or commerce covered by Rule 3 (1) (iii), the term service recipient has to be understood in the sense as explained in para 8.3 above.

8.5.In the context of export of service, once a service, on the basis of Rule 3 (1) (i), 3 (1) (ii) or 3 (1) (iii) of the Export of Service Rules, 2005 has been determined to have been received outside India i.e. consumed outside India, the conditions in Rule 3 (2) regarding their delivery outside India and use outside India are automatically satisfied as, as explained in para 8.1 above, in the context of services, the receipt, consumption and delivery of the service is the same. Therefore the condition regarding delivery of service being outside India and use of service being outside India prescribed in Rule 3 (2) of Export of Service Rules, 2005 were superfluous and for this reason only, these conditions were deleted, first, the condition regarding delivery of service being outside India was deleted w.e.f. 1/3/07 and thereafter the condition regarding use of service being outside India was deleted w.e.f. 27/2/10. These amendments, therefore, have to be treated as clarificatory amendments. Therefore if some service covered by Rule 3 (1) (iii) of Export of Service Rules, 2005, i.e. service in relation to business or commerce, has been provided by a person in India to a company located abroad, not having any branch or establishment in India, for use in its business, the service provided in India shall be treated as export, if the payment has been received in convertible foreign exchange. The performance of such service in India, would not make them received/consumed in India, if beneficiary user/recipient of said service provided in relation to business or commerce, who has paid for these service and has used the service in his business, is located abroad. The position would be different if the company located abroad who has paid for the service, also has some branch/ project in India and the service provided in India is meant for that branch/project only in that case, the consumption of service would be in India and the service would be taxable in India. But if the recipient company located abroad, has no branch or project or establishment in India and the service covered by Rule 3 (1) (iii) provided in India is meant for use in the business of the company located abroad, it would be export of service.

8.6.In view of the above discussion, the Boards Circular No. 141/10/2011 dated 13/5/11 clarifying that for the period prior to 27/2/10, the condition regarding used outside India also needs to be independently satisfied for availing the benefit of export and that effective use of advertisement services shall be the place where the advertising material is disseminated to the audience though the actual benefit to my finally accrue to the buyer who is located at another place is not only not in accordance with the provisions of Rule 3 (1) of the Export of Service Rules, 2005, but is also contrary to the law laid down by the Apex Court in the case of All India Federation of Tax Practitioners (supra) and Association of Leasing and Financial Service Companies (supra), as a service which has not been consumed in India, cannot be taxed in India.

9. In this case, M/s GAP, U.S.A. do not have any branch or project or business establishment in India. The service in relation to procurement of goods being provided by the appellant are entirely meant for M/s GAP, U.S.A. and the service in question, - business auxiliary service, covered by Rule 3 (1) (iii) of the Export of Service Rules, 2005 have obviously been used by M/s GAP, U.S.A. in relation to their business located abroad. Therefore these services have to be treated as delivered outside India and used outside India and since payment for the service has been received in convertible foreign exchange, the same would have to be treated as exported out of India. The impugned order passed by the commission is an absurd order contrary to the provisions of Export of Service Rules, 2005.

10. In any case, the issue involved in this case is identical to the issue involved in the case of Paul Merchant Ltd. and Ors. vs. CCE (supra) which stands decided in favour of the appellant.

11. In view of the above, the impugned order is set aside. The appeal is allowed.