• Dated 16^th March, 2026

Export of Service determined by place of effective use and recipient location – Rebate of service tax allowed by CESTAT, Chandigarh

BRIEF FACTS:

The appellants, was engaged in providing call center support services from India to its overseas group entity, British Airways, U.K., under a Master Service Agreement. The services were rendered to customers located in different international regions and consideration was received in convertible foreign exchange. The assessee paid service tax on such services and subsequently filed rebate claims treating the services as export under the Export of Service Rules, 2005. The Department rejected the rebate on the ground that the services were performed in India and therefore not "used outside India." The Commissioner (Appeals) allowed the rebate claim, against which the Revenue filed appeal before the Tribunal.

DEPARTMENT'S CONTENTION:

The Department contended that in order for a service to qualify as export under the Export of Service Rules, it must be provided from India and used outside India, with consideration received in convertible foreign exchange. It was argued that in the present case the call center services were performed within India and were therefore partly consumed in India, resulting in non-fulfilment of the condition relating to "use outside India". On this basis, the Department submitted that the Commissioner (Appeals) had erred in allowing the rebate claim. It was further emphasized that the matter pertained to rebate of service tax already paid and not to refund of accumulated input credit.

ASSESSEE'S CONTENTION:

The assessee contended that the services were provided to its overseas group entity, British Airways U.K., which was the contractual recipient and had paid consideration in convertible foreign exchange. The services were rendered solely for the benefit and effective use of the foreign entity, and therefore qualified as export of services. It was further submitted that the issue was already settled in the assessee's own earlier cases and supported by CBEC circulars clarifying that the expression "used outside India" is to be determined on the basis of effective use and enjoyment. Reliance was also placed on judicial precedents such as Paul Merchants Ltd., Vodafone Essar Cellular Ltd., and Microsoft Corporation (I) Pvt. Ltd. to establish fulfilment of the conditions for export.

DECISION:

The Tribunal held that the call center support services provided by the assessee to its overseas group entity, British Airways U.K., qualified as export of services under Rule 3(2) of the Export of Service Rules, 2005. It was observed that the crucial test for determining export is the place where the service is effectively used and enjoyed, and the location of the service recipient. Since the recipient was situated outside India, consideration was received in convertible foreign exchange, and the benefit of the services accrued to the foreign entity, the conditions prescribed for export were duly satisfied. Accordingly, the Tribunal upheld the order of the Commissioner (Appeals) allowing rebate of service tax and dismissed the appeal filed by the Revenue.

BTA's COMMENT:

This decision reinforces the settled legal principle that for determining export of services, the decisive factors are the location of the service recipient and the place of effective use and enjoyment of the service, rather than the mere place where the service is performed. Where services are rendered from India to an overseas client, consideration is received in convertible foreign exchange, and the benefit of such services accrues outside India, the transaction would qualify as export of services, thereby entitling the service provider to consequential rebate or refund benefits under the applicable statutory provisions.

Case Reference- Commissioner of Service Tax, Delhi-IV VS M/s BA Call Centre India Pvt. Ltd. [Service Tax Appeal No. 60568 of 2016]

Author- Madhurima Bose