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Commissioner of Service Tax-III, Mumbai v. M/s Vodafone India Ltd. and Ors.

Civil Appeal · 2025 INSC 914Decided 6 May 2025
Civil Appeal Nos. 10815-10819 of 2014 (with a large batch of connected appeals including C.A. Nos. 5252/2015, 5307/2015, 6556/2015, 2402-2403/2016, 571-572/2016, 10885/2016, 3692/2017, 1469/2017, 9152/2017, 4009/2018, 8045-8046/2018, 9140/2018, 10349/2018, 9745/2018, 10071/2018, 11837-11838/2018, 1440/2019, 4959/2019, 7483/2019, 9008-9009/2019, 2634/2020, 3546-3549/2020, 2424/2022, 12468-12471/2024, and others)
Mrs. Justice B.V. Nagarathna · Justice Satish Chandra Sharma

Background

This was a large batch of appeals filed by the Revenue (Service Tax Department) against multiple telecom and services companies: led by Vodafone India Ltd. and including group entities that provided services (such as international connectivity/roaming support) to overseas customers like Verizon Communications' US entity. In each case, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) had ruled in favour of the companies, holding that these services were genuinely "exported" out of India (since the recipient was located abroad and payment was received in convertible foreign exchange), meaning no service tax was payable and CENVAT credit on related inputs was rightly claimed. The Revenue challenged these findings, arguing that because the services were actually performed/delivered from India, they should not qualify as exports.

Decision Breakdown

Spanning the period 2003 to 2014 during which the "export of services" rules changed several times (Export of Service Rules 2005, and later Rule 6A of the Service Tax Rules plus the Place of Provision of Services Rules, 2012), the Court examined the specific contractual relationships, for instance, that Vodafone/Verizon-linked entities billed and were paid directly by their foreign counterpart on a principal-to-principal basis, with the recipient located outside India. It rejected the Revenue's late attempt to recharacterise the arrangement as an "intermediary service" (which would not qualify as an export), finding no factual basis for that claim at any earlier stage. The Court held that CESTAT had correctly applied the tests of "location of recipient" and "payment in convertible foreign exchange," and that these were essentially factual findings not shown to be perverse. All of the Revenue's appeals were dismissed, upholding the benefit of export-of-service treatment (and associated CENVAT credit) for the companies.

Lesson Learnt

For service tax purposes, a service can validly be treated as an "export", exempt from tax, even if performed by a person located in India, so long as the actual recipient of the service is located abroad and payment is received in convertible foreign exchange; the location of performance is not, on its own, determinative, and tax authorities cannot introduce new legal theories (like "intermediary service") for the first time on appeal without a factual foundation.

Official source (sci.gov.in)View Judgment (PDF)

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