- 1 - HC-KAR NC: 2025:KHC:31366-DB CEA No. 60 of 2017 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF AUGUST, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND CENTRAL EXCISE APPEAL No. 60 OF 2017 BETWEEN: 1. PRINCIPAL COMMISSIONER OF CENTRAL-TAX BENGALURU EAST COMMISSIONERATE, TTMC/BMTC BUILDING, DOMLUR, BENGALURU-560071. (FORMERLY KNOWN AS PRINCIPAL COMMISSIONER OF SERVICE TAX, BANGALORE-11) …APPELLANT (BY SRI JEEVAN J. NEERALGI, ADVOCATE) AND: 1. MISYS SOFTWARE SOLUTIONS (INDIA) PVT. LTD., EAGLE RIDGE, EMBASSY GOLF LINKS, BUSINESS PARK, OFF INTERMEDIATE RING ROAD, BENGALURU-560071. …RESPONDENT (BY SRI P.B. HARISH, ADVOCATE FOR SRI MOHAN MAIYA G. L., ADVOCATE) THIS CEA / CENTRAL EXCISE APPEAL IS FILED UNDER SECTION 35G OF THE CENTRAL EXCISE ACT, ARISING OUT OF ORDER DATED 01.02.2017 PASSED IN FINAL ORDER Digitally signed by VALLI MARIMUTHU Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:31366-DB CEA No. 60 of 2017 NO.20183-20185/2017, PRAYING THIS HON'BLE COURT TO DECIDE THE SUBSTANTIAL QUESTIONS OF LAW FRAMED AS ABOVE AND ALLOW THE APPEAL BY ANSWERING THE SAME IN FAVOUR OF THE APPELLANT IN THE INTEREST OF JUSTICE AND EQUITY. SET ASIDE THE IMPUGNED FINAL ORDER NO.20183-20185/2017 DATED 01.02.2017 PASSED BY THE CESTAT, BANGALORE IN THE INTEREST OF JUSTICE AND EQUITY. THIS APPEAL COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE K.V. ARAVIND) Heard Sri Jeevan J. Neeralgi, learned Senior Standing Counsel appearing for the appellant-Revenue, and Sri P.B. Harish, learned counsel representing Sri G.L. Mohan Maiya, learned counsel for the respondent-Assessee. 2. This appeal by the Revenue is directed against the Final Order Nos. 20183-20185/2017 dated 01.02.2017, passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru [‘CESTAT’]. - 3 - HC-KAR NC: 2025:KHC:31366-DB CEA No. 60 of 2017 3. The appeal was admitted to consider the following substantial questions of law: "(i) Whether, under the facts and circumstances of the case, the services rendered by the respondent to the customers in India on behalf of the foreign client and consumed in India and exhausted in India amount o 'Export of Services'? (ii) Whether, under the facts and circumstances of the case, the Tribunal is right in giving benefit of refund of export to the services provided and consumed/exhausted in the territory of India?" 4. In brief, the facts of the case are that the respondent- Assessee, registered since 12.06.2008 for rendering taxable services, filed three separate claims under Notification No.5/2006-CE dated 14.03.2006, seeking refund of unutilized CENVAT credit availed on input services utilized for the export of taxable services. Upon issuance of a show-cause notice, the refund claims came to be rejected by order dated 29.12.2010. The Commissioner (Appeals), by order dated 10.01.2014, partly allowed the refund claim of the Assessee. Aggrieved thereby, the Revenue preferred an appeal before the CESTAT, - 4 - HC-KAR NC: 2025:KHC:31366-DB CEA No. 60 of 2017 which came to be dismissed by order dated 01.02.2017. The present appeal by the Revenue is directed against the said order of the CESTAT. 5. Sri Jeevan J. Neeralgi, learned Senior Standing Counsel for the appellant-Revenue, submits that since the services provided from India were utilized in India, the Assessee is not entitled to refund of unutilized input service tax. It is further submitted that the requirement under Rule 3 of the Export of Services Rules, 2005 (hereinafter referred to as ‘the Rules’ for short) has not been complied with, as the same cannot be construed as export merely on the ground that payment for such services was received in convertible foreign exchange. 6. Per contra, Sri P.B. Harish, learned counsel appearing for Sri G.L. Mohan Maiya, learned counsel for the respondent- Assessee, submits that the requirement of use of service outside India is no longer a condition under Rule 3 of the Rules, inasmuch as the expression ‘used outside India’ came to be omitted with effect from 27.02.2010. It is further submitted that, in view of the judgment of the Hon’ble Supreme Court in Commissioner of Service Tax-III, Mumbai v. M/s. - 5 - HC-KAR NC: 2025:KHC:31366-DB CEA No. 60 of 2017 Vodafone India Limited in Civil Appeal Nos. 10815-10819 of 2014, the substantial questions of law are liable to be answered against the appellant-Revenue. 7. We have heard learned counsel for the parties and perused the appeal papers. 8. The show-cause period in the present case is from July 2008 to September 2008 and from April 2009 to September 2009. Rule 3 of the Rules, as it stood prior to the amendment, contemplated that the service should be provided from India and used outside India, and that payment for such service should be received in convertible foreign exchange. However, the requirement of use of service outside India came to be omitted with effect from 27.02.2010. After such omission, only two conditions remained to be satisfied under Rule 3 of the Rules, namely: (i) the recipient of the service is located outside India, and (ii) payment for the service is received in convertible foreign exchange. 9. The case of the Revenue is that, though the recipient of the service is located outside India and payment has been - 6 - HC-KAR NC: 2025:KHC:31366-DB CEA No. 60 of 2017 received in convertible foreign exchange, since the service is utilized in India, the Assessee is disentitled to refund. This contention cannot be accepted. The Hon’ble Supreme Court, while considering the controversy for the period between 2003 and 2014, has upheld the finding of the CESTAT extending relief to the Assessee under sub-rule (3) of Rule 3 of the Rules, on compliance with the twin conditions, namely: (i) the recipient of the service is located outside India, and (ii) payment for the service is received in convertible foreign exchange. Compliance with these twin conditions is not in dispute by the Revenue. 10. In light of the enunciation of law by the Hon’ble Supreme Court in M/s. Vodafone India Limited (supra), the substantial questions of law raised in this appeal are no longer res integra. The aforesaid judgment of the Hon’ble Supreme Court is squarely applicable to the facts and circumstances of the present case, and the issue stands concluded in favour of the Assessee. - 7 - HC-KAR NC: 2025:KHC:31366-DB CEA No. 60 of 2017 11. In light of the above discussion, we pass the following: Order (i) The substantial questions of law are answered in favour of the respondent-Assessee and against the appellant-Revenue. (ii) The appeal of the Revenue is dismissed. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE MV, List No.: 1 Sl No.: 35