Activity Of Giving Investment Advices To The Client Abroad Amounts To Export Of Services: CESTAT

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the activity of giving investment advice to a client abroad amounts to the export of services.

The bench of Sulekha Beevi C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the decision to accept the advice rests with the foreign client. The client who is abroad can opt to accept the advice given by the appellant or reject it. In such circumstances, a decision taken by a foreign client to invest in India cannot be said to be the deciding factor as to whether the advisory services amount to an export or not. In other words, the taxability of an event cannot depend on a decision taken by a foreign client.

The appellant/assessee is in the activity of managing the assets of various schemes of Sundaram Mutual Fund and gives advice on investment to clients both in India and overseas. While providing advisory services to clients abroad, they received consideration for inconvertible foreign exchange. They paid a service tax on the services they provided. The assessee then filed a rebate claim of Rs. 48,82,448 under Rule 5 of the Export of Services Rules 2005 for the period of October 2009 to March 2010.

The original authority allowed part of the claim to the tune of Rs. 9,21,881 and rejected the amount of Rs. 39,60,567. The balance rebate was rejected on two grounds: Firstly, on the grounds of limitation, and secondly, alleging that there is no export of services.

The assessee filed the appeal before the Commissioner (Appeals).

It was satisfied by the assessee before the Commissioner (Appeals) that the rebate claim was filed within the time limit. As per Board Circular No. 111/5/2009/ST dated 24/2/2009 as well as Circular No. 141 dated 1/10/2011 TRU, the services are to be considered exported.

The Commissioner (Appeals) allowed the appeal filed by the assessee. Thus the sanction of the balance rebate of Rs. 39,60,567.

The department contended that the assessee has provided advisory services for the investment of funds to the client abroad. Though the advice is given to the client abroad, the investment has been made in India, so the activity has to be construed as services used in India. Only if the services are used outside India can it be said that there is an export of services.

The assessee contended that when the assessee has provided advisory services to a client abroad and also received convertible foreign exchange as consideration, the activity has to be considered an export of services. The view taken by the department that because the investment is made in India by the foreign client, the service is provided within India and does not amount to the export of services is totally misplaced.

The tribunal held that the reasoning given by the Commissioner (Appeals) is proper and does not require any interference. The sanction of a refund to the assessee is legal and proper.

Counsel For Appellant: R. Rajaram

Counsel For Respondent: Rudra Pratap Singh

Case Title: The Commissioner of GST & Central Excise Versus M/s. Sundaram Asset Management Co. Ltd.

Case No.: Service Tax Appeal No.40569 Of 2013

Click Here To Read The Order