onsite services provided by foreign subsidiaries prior to 27 February 2010 cannot be considered as export and refund of CENVAT credit not available in respect of the same

Bombay HC decides - CENVAT credit refund ineligible in respect of onsite services provided by foreign subsidiaries to overseas clients prior to 27 February 2010, as the same does not constitute “export of service”

This Tax Alert which gives an update on the recent decision of the Bombay High Court [TS-415-HC-2014(BOM)-ST]

In the instant case, the taxpayer's foreign subsidiaries / branches were providing on-site services to taxpayer's clients abroad. Revenue contended that, prior to 27 February 2010, services provided by subsidiaries / branches could not be considered as export of services as they were not fulfilling the condition namely 'services provided from India' as contained in Rule 3(2)(a) of Export of Services Rules, 2005.

High Court upheld the decision of the CESTAT that the refund of accumulated CENVAT credit against these services could not be given to the taxpayer, as these services did not qualify as export of services.

While interpreting the provisions of Rule 3(2)(a) of the Export Rules, the Court has proceeded on literary construction of the expression "provided from India".