CESTAT Mumbai Holds Investment Advice To Overseas Client Is Export, Allows Tata Realty Refund

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 7 July held that investment advisory services provided by an Indian company to an overseas client qualify as export of service, even if the advice relates to investment opportunities in India.

Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban allowed the appeal filed by Tata Realty & Infrastructure Ltd. and held that the company was entitled to refund of accumulated CENVAT credit as the services were provided to a foreign recipient and consideration was received in convertible foreign exchange. The Bench observed:

"Since, for analyzing market study about investment and submission of research report/financial reports, the appellants have charged to the overseas entity in convertible foreign exchange, it cannot be said that they had provided any service to the Indian customers/clients belonging to overseas entity. Further, it is not the case of Revenue that in the agreement entered between the appellant and the overseas entity, there was any reference of provision of any service in particular to the clients/customers in India... Thus, the requirement of export of service, in our considered view, is duly complied with for consideration of the provision of service as export."

The appeal was filed after the Commissioner (Appeals) rejected Tata Realty & Infrastructure's claim for refund of unutilised CENVAT credit. The Revenue had contended that the investment advisory services were consumed in India as they related to Indian companies and investment opportunities.

The Tribunal noted that Tata Realty & Infrastructure had entered into an agreement only with its Mauritius based client, TRIF Management (Mauritius) Ltd., and had no contractual relationship with any Indian companies. The advisory reports and financial analysis were prepared exclusively for the overseas recipient, which paid the consideration in convertible foreign exchange.

Rejecting the Revenue's contention, the Bench held that the location of the investment opportunities could not determine the place of consumption of services. It observed that the recipient of the services was the overseas entity, which received the advisory reports and paid for the services.

Relying on earlier decisions including Goldman Sachs (India) Securities Pvt. Ltd., Sundaram Asset Management Co. Ltd. and the Bombay High Court judgment in Q India Investment Advisory Pvt. Ltd., the Tribunal held that Tata Realty & Infrastructure satisfied the conditions for export of service under the Export of Service Rules, 2005.

Accordingly, the CESTAT set aside the order passed by the Commissioner (Appeals) and allowed the appeal, granting refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004.

For the Appellant: Shri S.S. Gupta, Advocate

For the Respondent: Shri Dhananjay Dahiwale