CESTAT Rules Marketing Support Services as Export: Dell India’s Appeal Allowed on Merits, Remanded for Limited Verification
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Bangalore, has allowed Dell India Pvt. Ltd.’s appeal on merits, holding that the marketing and support services provided by the company to its foreign group entities qualify as export of services. The matter has, however, been remanded for the limited purpose of verifying the correlation between export invoices and Foreign Inward Remittance Certificates (FIRCs).
The Division Bench comprising P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) observed that under the Export of Service Rules, 2005, the relevant criterion is the location of the service recipient, not the place where the service is performed or where the customers of the service recipient are situated. The Tribunal clarified that the place of consumption of goods or services within India does not disqualify the services from being treated as exports if the recipient is located outside India and payment is received in convertible foreign exchange.
Background
Dell India Pvt. Ltd., engaged in marketing and promotional activities in India for its foreign affiliates — Dell Global BV (DGBV), Netherlands and Dell Asia Pacific, Malaysia — had classified such activities under “Business Auxiliary Service.” The company filed rebate claims under Notification No. 11/2005-ST dated 19.04.2005, read with Rule 5 of the Cenvat Credit Rules, 2004, treating these services as exports under Rule 3 of the Export of Service Rules, 2005. The consideration for the services was received on a cost-plus markup basis in convertible foreign exchange. However, the Commissioner (Appeals), LTU Bangalore, rejected the rebate claims, holding that since the goods promoted were sold and consumed in India, the services could not be treated as exports. The authority also held that the Cenvat credit availed by Dell India was ineligible, thereby making the refund claim untenable.
Appellant’s Submissions
On appeal, Dell India argued that its marketing support and logistical services were rendered to recipients located outside India, namely DGBV and Dell Asia Pacific, and the payments were received in convertible foreign exchange. Therefore, the services satisfied all the conditions prescribed under Rule 3 of the Export of Service Rules, 2005.
Relying on the decisions of the Larger Bench in Arcelor Mittal Stainless (I) Pvt. Ltd. v. CST, Mumbai (2023) and Sun Microsystems (I) Pvt. Ltd. v. CCE & ST, Bangalore (2023), the appellant contended that the determining factor is the location of the service recipient and not the destination of the goods or services promoted. Dell India further submitted that the Commissioner (Appeals) had exceeded the scope of the show cause notice by questioning the eligibility of Cenvat credit, even though the notice did not contain such allegations.
The appellant also cited judicial precedents including Commissioner of Customs, Mumbai v. Toyo Engineering India Ltd. (2006) and CCE v. Brindavan Beverages (P) Ltd. (2007) to emphasize that a refund claim cannot be denied on grounds not stated in the show cause notice. It also relied on CCE, Hyderabad v. Qualcomm India Pvt. Ltd. (2021) to contend that the eligibility of Cenvat credit cannot be questioned at the stage of deciding rebate claims. Regarding the Department’s argument that trading was an exempted service, Dell India submitted that during the relevant period (April 2007 to March 2009), trading was not classified as an exempted service under Rule 2(e) of the Cenvat Credit Rules, 2004, and was included only after the amendment vide Notification No. 3/2011-CE (NT) dated 01.03.2011.
Revenue’s Stand
The Department argued that since the goods were ultimately delivered to Indian customers, the services rendered could not be treated as exports. It further submitted that there was no correlation between FIRCs and export invoices, and requested the Tribunal to remand the matter for verification of these documents.
Tribunal’s Findings
After hearing both sides, the Tribunal examined whether the marketing and promotional services provided by Dell India amounted to export of services. Referring extensively to the Larger Bench decision in Arcelor Mittal Stainless (I) Pvt. Ltd., the Tribunal observed: “The relevant factor is the location of the service receiver. The place of performance of the service or the place where the customers of the service receiver are located is irrelevant.”
The Tribunal noted that in cases where an Indian entity provides services to a foreign company to help it book orders from Indian customers, the services are considered exported so long as the foreign company is located outside India and payments are received in foreign exchange. It held that the Commissioner (Appeals) had erred in treating the services as domestic merely because the goods were sold and consumed in India. The Tribunal also found that the denial of Cenvat credit was beyond the scope of the show cause notice, as the notices primarily raised issues of documentation and correlation, not credit eligibility.
Referring to the relevant amendments in the Export of Service Rules, 2005, the Bench concluded that the amendments made by Notification Nos. 30/2007, 5/2008, 20/2008, and 30/2009 did not alter the position applicable to the disputed period (April 2007 to March 2009). Hence, the Larger Bench decision squarely applied to Dell India’s case.
Holding that Dell India’s services qualified as export of services, the Tribunal observed that the grounds relied upon by the Commissioner (Appeals) to reject the rebate claims were unsustainable. However, it noted that the factual verification of FIRCs and export invoices had not been undertaken by the lower authority. The Bench thus ordered: “Though on merit the appellant is eligible for the rebate claim, the matter is remanded only to verify the export invoices against the FIRC copies for the relevant rebate claims.”Accordingly, the appeal was allowed on merits and remanded for limited verification.
Appearance
Mr. Syed M Peeran, Mr. Siddhartha Bayle and Ms. Samruddhi Shetty, Advocates for the Appellant
Ms. Money Jain, Joint Commissioner, Authorised Representative for the Respondent
Cause Title: Dell India Pvt. Ltd. Versus The Commissioner of Central Excise and Service Tax (Appeals)
Case No: Service Tax Appeal No. 271 of 2011
Coram: P.A. Augustian (Judicial Member), R. Bhagya Devi (Technical Member)
