After the 2-member bench consisting of Mr. DN Panda & Mr. Mathew
John pronounced a Difference of Opinion order in October, 2011, the
matter was referred for opinion to a 3rd Member Mr. Rakesh Kumar. Last
month, he held in favour of assessee and against the Department. Matter
thereupon was remanded to the original bench for passing of a majority
order.
Western Union Money Transfer through its main agents Paul
Merchants Ltd. and Transcorp had been fighting a protracted battle in
North & South Indian CESTAT. Most of the interim decisions of
Bangalore CESTAT have been in favour of the sub-agents, holding that the
services are not taxable, as these are not rendered in India. What is
rendered in India is only
the money to the recipient but the real
service
receiver is the person who hands over the money to the money transfer
entity (say WUMT) who becomes the service provider. There is a
contractual obligation between them and the requisite fee is paid by the
remitter in a foreign
country and not by the recipient in India, who
has no contractual obligation with anyone. The recipient can walk into
any of the about 80,000 of such outlets in India, disclose the secret
code sent by remitter to the Agent / sub-agent of (say) WUMT alongwith
his / her identity. The Agent / sub-agent logs into the system of WUMT
to confirm details and advances money to the recipient from his own
pocket and claims it from WUMT for reimbursement, which is then paid to
him through the main agent. As the amount of remittance and commission
is received in foreign exchange by the first nominated bank, it is
eligible as being considered as export of service under the previous EOS
rules.
Key Questions being decided today :
(i) who is the recipient of the service provided
by Agents and the sub-agents whether the WU located abroad or the persons in
India who received the money sent by their relatives, friends etc. abroad
through WU;
(ii) Whether the services, in question, have
been used and consumed, abroad by the WU or used and consumed in India by the
intended beneficiaries of the money sent by persons abroad through WU;
Further,
whether the benefit of EOS be restricted only to the main agent in
whose bank account the convertible foreign exchange or also to the
sub-agent who gets the money in Indian currency thru the main agent , is
also an issue. In this case, the commission was paid to him after TDS
by main agent.
Or whether the sub-agent is also an agent of WUMT and thus eligible for similar exemption, was another query ?
Whether
such sub-agents whose commission was below the threshold limit,
eligible to SSI benefit, though they represented the brand name of a
registered foreign entity, was ably argued by
CA Ankit Gulgulia before CESTAT, Delhi.
Case on behalf of main agents was argued by
Senior Advocate Joseph Vellapally, Advocates Mr. Rakesh Chitkara & Mr. Bipin Garg. We shall bring you the final order
today.
PS : 1.Applicability of this order may be only upto
30.06.2012. The Service Tax law has undergone a sea change from 1.7.12.
Even having an intermediary in India will take away the exemption, as
per new law. The CBEC circular no.
163/14/2012 issued on 10-07-2012
Clarification on
service tax on remittancs gives the impression that such
services have become exempt. What is not said is the crux of the issue.
More controversies on the way.
2. Weizmann, the main assessee has also been fighting a battle in CESTAT (Mumbai) which has yet to pronounce finally.
Rebecca Andrews