Page 118 - GSTL_2nd July 2020 _Vol 38_Part 1

36 GST LAW TIMES [ Vol. 38
tion, the scope of Rule 4 must necessarily be scrutinized to ascertain if there
was, indeed, legislative intent to deny acknowledgement as exporter to a
certain category of service providers that were so privileged tell them.
There is no dispute that the recipient of service is located outside India and
that the consideration is received in foreign convertible currency. Yet, Rev-
enue insists that performance of service is in India. A service is not neces-
sarily a single, discrete, identifiable activity; on the contrary, it is a series of
invisibles that cater to the needs of a recipient; it is upon the consumption
of the service by the recipient that service is deemed to have become taxa-
ble. This has been so held by the Hon’ble Supreme Court in All India Federa-
tion of Tax Practitioners v. Union of India & others [2007 (7) S.T.R. 625 (S.C.)]
below :-
‘7. In the light of what is stated above, it is clear that Service Tax is a
VAT which in turn is destination based consumption tax in the sense
that it is on commercial activities and is not a charge on the business but
on the consumer and it would, logically, be leviable on services provid-
ed within the country.’
It would appear from the exposition in the judgment that the tax was in-
tended as a levy on activities that would otherwise be performed by the re-
cipient for itself. The new industry of hiving out or outsourcing of what
was, conceivably, being done within the enterprise was intended to be sub-
ject to the new levy. In the matter of service rendered by respondent, this
activity could, but for commercial viability, will be executed by the recipi-
ent within its own organization or the territory in which it exists. The satis-
faction of the customer occurs upon an outcome which is possessed by the
recipient. Hence, even if some of the activities are carried out in India, by
no stretch can it be asserted that the fulfilment of the activity is in India.
Therefore, the inescapable conclusion is that the location of the actual per-
formance of the service is outside India and, even with the special and spe-
cific provision of Rule 4 of Place of Provision of Services Rules, 2012, the
performance of service being rendered outside India would render it to be
an export.
14. In this context, the legislative intent of incorporating a special and spe-
cific provision in Rule 4 may yield further insights. The special provision,
which may be seen as an exception to the general Rule 3, deals with ser-
vices in respect of goods as well as those provided to individuals. Not un-
naturally, the services that require the physical presence of the person is
taxed where the consumer receives the service and not at his location which
as per Rule 2(i)(iv) would be his usual place of residence. In what can be
considered as a most telling example of the scope of this portion of Rule 4,
we could do a lot worse than refer to a decision of the Hon’ble High Court
of Delhi that, in the course of dealing with other, more weighty matters in
Orient Crafts Ltd. v. Union of India [2006-TIOL-271-H.C.-DEL-S.T. = 2006 (4)
S.T.R. 81 (Del.)], took note of, and answered, one of the submissions thus -
‘4. The contention of the Learned Counsel for the petitioner, based on
the interpretation of Section 66A of the Act, is that any service that is ob-
tained by a person who has a fixed place of business in India is liable to
tax for services availed by him in a foreign country. By way of an exam-
ple, Learned Counsel for the petitioner has cited that if such a person in
India goes abroad, and has a haircut, he would be liable to pay service
tax in India on the basis of Section 66A of the Act.

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