Service by Postal Dept. to a Foreign based Entity while Executing Remittance of Forex to intended recipient in India constitute ‘Export of Service’: CESTAT [Read Order]

The Delhi CESTAT in a case of M/s western Union Financial Services Inc. against the order of CST, wherein held that Service by Postal Department to a Foreign-based Entity while executing remittance of forex to the intended recipient in India constitute ‘ Export of Service ’.

In instant case, 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 Western Union in different places abroad for remitting money to their relatives living in India by using a secret code which is known to the sender and receiver.

Since the appellant has no person India, they entered into Representative Agreement with Post & Telegraph Department of India for rendering the service or transfer the money to the designated nominee located in India on behalf of the appellant.

Here the dispute begins with refund claim of appellant and original authority held that the appellants are not eligible for refund both on merits as well as on the principle of unjust enrichment. On appeal, the Commissioner (Appeals) upheld the rejection of refund claims.

Thereafter, Appellant preferred the said appeal challenging the findings of lower authorities both on merit and on unjust enrichment. A.R. Madhav Rao and Ms.Nandita Narayan are the Advocates for the appellants and they argued that company has similar arrangements with various other agents other than the Department of Post to provide the money transfer service to the recipient in India.

The appellant also cited various case laws and especially relied on the stay order of the Tribunal in the case of Weizmann Forex Ltd. and submitted that service rendered by Weizmann Forex ltd to Western Union is held to be the export of service not liable to service tax.

The advocate for Assessee also added that the services, which are taxed, at the hands of the Department of Post are essential with reference to remittance of money to the recipient in India.

Finally, the tribunal bench observed “In case of “Business Auxiliary Service” which is listed in Rule 3(1)(iii) of Export of Service Rules, 2006, the place of provision of service shall be determined by the location of the recipient of such service. 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”.