Ms Xomox sanmar Ltd vs TIRUCHIRAPALLI CE&ST

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH – COURT No. I

Service Tax Appeal No. 41517 of 2016
(Arising out of Order-in-Appeal No. 27/2016-TRY (ST)(R) dated 04.05.2016 passed by
Commissioner of Customs & Central Excise (Appeals-2), No. 1, Williams Road, Cantonment,
Tiruchirappalli – 620 001)
And
Service Tax Appeal No. 42199 of 2016
(Arising out of Order-in-Appeal No. 57/2016-TRY (ST) dated 20.09.2016 passed by
Commissioner of Central Excise (Appeals-II), No. 1, Williams Road, Cantonment,
Tiruchirappalli – 620 001)

M/s. Xomox Sanmar Ltd. ...Appellant
Unit I, No. 89/2-A,
Vadugapatty Village,
Viralimalai – 621 316.
Versus

Commissioner of GST and Central Excise ...Respondent
Trichy Commissionerate,
No. 1, Williams Road,
Cantonment,
Trichy – 621 001.

APPEARANCE:
For the Appellant : Ms. Radhika Chandrasekaran, Advocate
For the Respondent : Ms. G. Krupa, Authorised Representative
CORAM:
HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON’BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)


FINAL ORDER Nos. 40980-40981 / 2026

DATE OF HEARING : 30.06.2026
DATE OF DECISION : 31.08.2026

Per Mr. VASA SESHAGIRI RAO

Service Tax Appeal No. ST/41517/2016 filed by
M/s. Xomox Sanmar Limited is directed against Order-in-
Appeal No. 27/2016 dated 04.05.2016, passed against

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Order-in-Original No. 18/2015 dated 18.05.2015, covering
the period April 2009 to March 2014. Service Tax Appeal No.
ST/42199/2016, also filed by M/s. Xomox Sanmar Limited, is
directed against Order-in-Appeal No. 57/2016 dated
20.09.2016, passed against Order-in-Original No. 06/2016
dated 31.03.2016, covering the period April 2014 to March
2015. Since both appeals relate to the same activity and
involve common questions of classification and export of
services, they are taken up together for disposal by this
common order.

2. The appellant, engaged in the manufacture of
industrial valves, valve actuators, enclosed gears and other
engineering products, also rendered engineering-related
services to M/s. Xomox International GmbH & Co., Germany
(“Xomox Germany”), in relation to goods manufactured by
M/s. Sanmar Foundries Limited, Viralimalai (“SFL”), for which
it received USD 2,000 per month in convertible foreign
exchange and treated the receipts as export of services. The
first Show Cause Notice dated 16.10.2014, covering April
2009 to March 2014, alleged the activity to be Technical
Inspection and Certification Service and, from 01.07.2012,
invoked Rule 4 of the Place of Provision of Services Rules,
2012. Order-in-Original No.18/2015 dated 18.05.2015
confirmed service tax of Rs.6,91,329/-, with interest and

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penalties, which was upheld by Order-in-Appeal No.27/2016
dated 04.05.2016. The second Show Cause Notice dated
07.09.2015, covering April 2014 to March 2015, resulted in
Order-in-Original No.06/2016 dated 31.03.2016, confirming
service tax of Rs.14,476/-, with interest and penalties,
upheld by Order-in-Appeal No.57/2016 dated 20.09.2016.
Aggrieved by the said orders, the appellant is before the
Tribunal.

3.1 The Ld. Advocate Ms. Radhika Chandrasekaran,
for the appellant, submitted that the impugned orders
proceeded on an erroneous assumption that the service was
essentially inspection and certification. The contractual and
contemporaneous evidence, according to learned Counsel,
establishes that Xomox Germany engaged the appellant for
engineering services and that inspection was only one
component of a wider engineering assignment.

3.2 The Ld. Counsel submitted that the job
description covered engineering, development, quality and
dispatch activities, including drawing release and correction,
drawing clarification and translation, dimension deviations
and modifications, technical issues, development of castings,
pattern development and rectification, material
specifications, PED requirements, inspection plans, corrective

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action reporting, packing and dispatch requirements and
other engineering assignments. Reliance was placed upon
the contemporaneous email correspondence, the job
description, the letter dated 29.02.2008 addressed to the
Superintendent of Central Excise (Audit), Debit Note No.009
dated 31.12.2007 describing the amount as “Service
Engineer Charges”, and the letter dated 05.05.2009 issued
by Xomox Germany confirming payment of USD 2,000 per
month towards engineering services.

3.3 The Ld. Counsel further submitted that, for the
period prior to 01.07.2012, the service was classifiable under
Rule 3(1)(iii) of the Export of Services Rules, 2005. Particular
reliance was placed upon the judgment of the Hon'ble
Supreme Court in Commissioner of Service Tax-III, Mumbai
v. Vodafone India Ltd., 2025 INSC 914; 2025 (8) TMI 938;
(2025) 33 Centax 152 (S.C.), especially in relation to the
statutory amendment effective from 27.02.2010 whereby the
requirement of “provided from India and used outside India”
was omitted. For the period from 01.07.2012, learned
Counsel submitted that Rule 3 of the POP Rules applied and
Rule 4 was not attracted merely because some activities
were performed at SFL's premises. Reliance was also placed
upon the case laws cited in the written submissions on
limitation, particularly Anand Nishikawa Co. Ltd. v. CCE,

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2005 (188) E.L.T. 149 (S.C.); Pahwa Chemicals Pvt. Ltd. v.
CCE, 2005 (189) E.L.T. 257 (S.C.); Continental Foundation
Joint Venture v. CCE, 2007 (216) E.L.T. 177 (S.C.) and
others .

4. The Ld. Authorized Representative Ms. G. Krupa
reiterated the findings in the impugned orders and submitted
that the appellant had deputed specially trained personnel to
SFL for inspection and examination of castings and related
quality activities. According to Revenue, the actual activity
performed in India and the physical availability of the goods
were determinative. Reliance was placed upon Commissioner
of Central Excise, Mangalore v. SGS India (Pvt.) Ltd., 2010
(17) S.T.R. 92 (Tri.-Bang.), besides the provisions relied
upon in the respective show cause notices.

5. Upon rival submissions and scrutiny of the
appeal papers, the following questions arise for
determination: -
i. Whether the services rendered by the appellant were
classifiable as Consulting Engineer Service or as
Technical Inspection and Certification Service?
ii. Whether the services qualified as export of services
during the respective periods and, consequently,

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whether the demands of service tax, interest, limitation
and penalties are sustainable?

6. We now proceed to examine the issues framed
for determination sequentially.

Issue No. (i): Classification of the Services
7. The first Show Cause Notice dated 16.10.2014
covers April 2009 to March 2014. For the period prior to
01.07.2012, the Department alleged that the activities
undertaken by the appellant at SFL, particularly inspection
and examination of castings and quality-related activities,
constituted Technical Inspection and Certification Service
taxable under Section 65(105)(zzi) read with Section
65(108) of the Finance Act, 1994. For the period from
01.07.2012 to March 2014, the Department continued to
proceed on the basis that the activity was
inspection/examination of goods and invoked Rule 4 of the
POP Rules. The second Show Cause Notice dated
07.09.2015, covering April 2014 to March 2015, proceeded
substantially on the same basis.

8. The question of classification has to be
determined from the substance of the service contracted for
and actually rendered. Section 65A of the Finance Act, 1994

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prescribed the principles for classification of taxable services.
Where a service was prima facie classifiable under more than
one taxable category, the more specific description was to be
preferred and, where a composite service could not be so
classified, its classification was to be determined by the
service which gave it its essential character.

9. The question before us is therefore whether the
substance of the assignment was Technical Inspection and
Certification Service or a broader engineering service.

10. The definition invoked by the Department,
namely Technical Inspection and Certification Service,
contemplated inspection or examination for the purpose of
certifying that specified standards or characteristics were
maintained. The Revenue relies upon the portions of the job
description dealing with prototype casting inspection/
approval, inspection plans, bulk/series inspection approval,
inspection report coordination and corrective action
reporting. These activities undoubtedly contain an element of
inspection and quality control. However, the job description
cannot be read selectively.

11. The job description placed on record sets out the
assignment under four heads, namely, “Engineering”,

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“Development”, “Quality” and “Dispatch”. Under
“Engineering”, it refers to drawing release, drawing
clarification and translation, drawing correction in CIMCAD,
dimension deviations/modifications and technical issues.
Under “Development”, it refers to prototype casting
inspection/approval, material specification clarification and
PED requirements. Under “Quality”, it refers to development
of inspection plans, bulk/series inspection approval,
inspection-report coordination and corrective-action
reporting. Under “Dispatch”, it refers to packing methods,
alternate packing materials, rust-protection methods,
coordination, documentation and dispatch details of critical
items.

12. The email correspondence dated 23.03.2005
concerning the “Job Description & Activity Status”, and the
response from the German side, is significant because it
predates the dispute and demonstrates that the assignment
was understood by the foreign customer as an engineering
role. The letter dated 05.05.2009 from Xomox Germany is
even more specific. It records payment of USD 2,000 per
month for the services of Mr. G. Saravanan, or another
person performing the same role, for engineering services
towards development of castings, pattern development,
pattern rectification and other engineering assignments.

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Debit Note No.009 dated 31.12.2007 describes the
consideration as “Service Engineer Charges”.

13. The letter dated 29.02.2008 addressed to the
Superintendent of Central Excise (Audit), enclosing the
activities undertaken under the arrangement and the Debit
Note, further corroborates the nature of the engagement.
There is no separate charge for inspection and no evidence
that Xomox Germany engaged the appellant as an
independent inspection or certification agency. The
consideration was a monthly amount for the services of an
engineer performing the wider assignment.

14. The decision in Commissioner of Central Excise,
Mangalore v. SGS India (Pvt.) Ltd., 2010 (17) S.T.R. 92
(Tri.-Bang.), relied upon by the Revenue, is distinguishable
on facts. In that case, the Tribunal was concerned with
activities having the essential character of inspection,
examination and certification of goods, and accordingly
considered the service under the category of Technical
Inspection and Certification Service. In the present case,
however, the contractual and other contemporaneous
documents establish a broader engineering assignment
comprising drawing-related assistance, development and
rectification of castings and patterns, technical clarification,

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material specifications, quality coordination and dispatch-
related technical assistance, with inspection forming only one
part of the overall assignment. The ratio of SGS India,
therefore, cannot be applied to classify the entire
engineering assignment as Technical Inspection and
Certification Service merely because certain inspection and
quality-related activities were performed in the course of
rendering the service.

15. We accordingly find that the services rendered
by the appellant throughout the periods in dispute were in
the nature of engineering advice, consultancy and technical
assistance, and not an independent service of technical
inspection and certification. For the period up to 30.06.2012,
the services are therefore classifiable as Consulting Engineer
Service under Section 65(105)(g) read with Section 65(31)
of the Finance Act, 1994. For the period from 01.07.2012
onwards, although the negative-list regime came into force
and the statutory framework governing taxation of services
underwent a change, the nature of the activity continued to
remain the same. The service was accordingly an
engineering service rendered to Xomox Germany, and its
taxability/export status for the said period has to be
determined under the provisions then in force, including
Section 66B, Rule 6A of the Service Tax Rules, 1994 and the

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Place of Provision of Services Rules, 2012. The classification
issue is therefore decided in favour of the appellant.

Issue No. (ii): Export, Limitation, Interest and Penalties
16. Having determined the nature of the service, the
question whether the same qualified as export has to be
examined separately for the different statutory periods,
namely April 2009 to 26.02.2010, 27.02.2010 to 30.06.2012
and 01.07.2012 onwards, since the statutory provisions
governing export of services underwent material changes
during these periods.

27.02.2010 to 30.06.2012
17. The Ld. Counsel has placed particular reliance
upon the judgment of the Hon'ble Supreme Court in
Commissioner of Service Tax-III, Mumbai v. Vodafone India
Ltd., 2025 INSC 914; 2025 (8) TMI 938; (2025) 33 Centax
152 (S.C.). We have examined the said judgment. The
Hon'ble Supreme Court considered the successive versions of
Rule 3 of the Export of Services Rules, 2005 and the
distinction between the different categories of services. The
Court noted the legislative changes governing export of
services and, in particular, the position after 27.02.2010.

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18. The significance of Vodafone, as relied upon by
the appellant, is that the requirement that the service should
be “provided from India and used outside India” was omitted
from Rule 3(2) with effect from 27.02.2010. The Hon'ble
Supreme Court examined the statutory scheme governing
the export of services after the said amendment and the
conditions applicable to the relevant category of services.
The decision is therefore relevant while determining whether
the Department can rely upon the physical performance of
the service in India despite the omission of the aforesaid
requirement.

19. In the present case, having held that the
services were classifiable as Consulting Engineer Service, the
appellant's contention that the same fell under Rule 3(1)(iii)
of the Export of Services Rules, 2005 requires consideration.
Xomox Germany was the contractual recipient located
outside India and the consideration of USD 2,000 per month
was received in convertible foreign exchange. Once the
requirement of “provided from India and used outside India”
ceased to form part of the applicable statutory test from
27.02.2010, the mere fact that the engineer physically
performed certain activities at SFL's premises cannot, by
itself, revive that omitted requirement. We therefore find

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considerable force in the reliance placed by learned Counsel
on Vodafone.

20. In view of the aforesaid statutory amendment
and the principles laid down in Vodafone, the requirement
that the service should be “provided from India and used
outside India” cannot be applied for the period subsequent to
27.02.2010. In the present case, the contractual recipient
was Xomox Germany, located outside India, and the
consideration was received from that foreign recipient in
convertible foreign exchange. The mere fact that certain
engineering activities were physically performed at SFL's
premises cannot, by itself, defeat the appellant's claim for
export treatment during the period 27.02.2010 to
30.06.2012.

April 2009 to 26.02.2010
21. The position for the period April 2009 to
26.02.2010 requires separate consideration. During this
period, Rule 3(2)(a) required the service to be provided from
India and used outside India. The contractual engagement
was with Xomox Germany; Xomox Germany made the
payment in convertible foreign exchange; and the relevant
documents describe the assignment as engineering services
relating to development of castings, patterns, pattern

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rectification and related engineering requirements. SFL was
not the contractual recipient and did not make payment for
the service.

22. The Department has not established from the
contractual documents or other material on record that SFL
was the recipient or user of the engineering service. On the
contrary, the contractual engagement was with Xomox
Germany, which made the payment in convertible foreign
exchange, and the documents describe the assignment as
engineering services undertaken for the foreign customer's
requirements relating to development of castings, patterns,
pattern rectification and other engineering matters. SFL was
not the contractual recipient and did not make payment for
the service. On the material available on record, we
therefore find that the Department has not established that
the service was used in India so as to deny the appellant the
benefit of export treatment.

01.07.2012 onwards — Rule 6A and Place of Provision
23. For the period from 01.07.2012 onwards, Rule
6A of the Service Tax Rules, 1994 governs the determination
of export of services. The provider was located in the taxable
territory, the recipient was located outside India, the service
was not one specified in Section 66D, consideration was

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received in convertible foreign exchange and there is no
dispute that the provider and recipient were not merely
establishments of a distinct person. The principal controversy
is therefore Rule 6A(1)(d), namely, whether the place of
provision of the service was outside India.

24. Rule 3 of the Place of Provision of Services Rules,
2012 is the general rule and provides that the place of
provision is the location of the recipient, subject to specified
exceptions. Rule 4 is one such exception and applies to
services in respect of goods which are required to be made
physically available to the service provider, or a person
acting on his behalf, in order to provide the service.

25. The statutory test under Rule 4 is therefore not
merely whether the goods were physically present at the
place where the service provider happened to perform some
activity. What has to be established is that physical
availability of the goods was necessary for providing the
service. In the present case, the relevant documents
establish a continuing engineering assignment covering
drawing release and correction, technical clarification,
development and rectification of castings and patterns,
material specifications, PED requirements, quality procedures
and dispatch-related technical assistance. The Department

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has not established that physical availability of the castings
was necessary for providing the engineering service as a
whole.

26. The fact that some inspection and quality-related
activities were carried out at SFL's premises cannot,
therefore, by itself bring the entire engineering assignment
within Rule 4. The contractual recipient remained Xomox
Germany, the consideration was payable by Xomox Germany
and the Debit Note was raised in relation to the foreign
customer. SFL was not the recipient of the contracted
service. We therefore hold that the specific exception in Rule
4 has not been established and that the general rule under
Rule 3 applies, resulting in the place of provision being
outside India.

27. Consequently, the services rendered by the
appellant during the period from 01.07.2012 to March 2015
satisfy the conditions of Rule 6A and qualify as export of
services. The service tax demands of Rs.6,91,329/- for April
2009 to March 2014 and Rs.14,476/- for April 2014 to March
2015 are therefore unsustainable on merits.

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Limitation
28. The first Show Cause Notice dated 16.10.2014
covering April 2009 to March 2014 invoked the extended
period on the allegation that the appellant had not disclosed
the true nature of the services and had wrongly treated the
receipts as export. However, the record shows that the
Department had raised an audit query in 2008 regarding the
applicability of service tax to the amount received from
Xomox Germany and that the appellant, by letter dated
29.02.2008, furnished details of the activities undertaken
under the arrangement, together with the relevant Debit
Note and balance-sheet particulars.

29. The appellant has relied upon Anand Nishikawa
Co. Ltd. v. CCE, 2005 (188) E.L.T. 149 (S.C.); Pahwa
Chemicals Pvt. Ltd. v. CCE, 2005 (189) E.L.T. 257 (S.C.);
and Continental Foundation Joint Venture v. CCE, 2007 (216)
E.L.T. 177 (S.C.). We find the principles in Anand Nishikawa,
Pahwa Chemicals and Continental Foundation particularly
relevant. Extended limitation requires the statutory
ingredients of wilful suppression, misstatement or
contravention with intent to evade tax and cannot be
invoked merely because the Department subsequently takes
a different view of the assessee's tax position.

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30. In the present case, the appellant had disclosed
the arrangement to the Department in 2008 and had
consistently treated the receipts from Xomox Germany as
export of services. The essential facts relating to the activity
were therefore within departmental knowledge well before
issuance of the first Show Cause Notice. There is no material
establishing deliberate suppression with intent to evade tax.
The extended period is consequently not invocable. The
second Show Cause Notice, covering April 2014 to March
2015, was within the normal period; however, that demand
independently fails on merits for the reasons already
recorded.

Interest and Penalties
31. Interest under Section 75 is consequential upon
a legally sustainable service tax liability. Since the
substantive demands fail on merits, the consequential
interest cannot survive.

32. The penalties imposed under Sections 76 and 78
also cannot survive once the substantive service tax liability
itself is held not to arise. As regards Section 77, no
independent contravention warranting such penalty has been
established on the facts of the present case. The appellant
had disclosed the transaction to the Department and had

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consistently maintained its claim that the receipts
represented export of services. The circumstances therefore
do not warrant penal consequences.

33. We accordingly hold that the services rendered
by the appellant to Xomox Germany qualified as export of
services during the periods in dispute. The first demand is
also unsustainable to the extent the extended period has
been invoked. Consequently, the demands of service tax,
interest and penalties are liable to be set aside. Issue No. (ii)
is accordingly decided in favour of the appellant.

34. For the reasons recorded above, we hold that the
services rendered by the appellant to M/s. Xomox
International GmbH & Co., Germany, are classifiable, for the
period to which the pre-negative-list classification provisions
apply, as Consulting Engineer Service, and qualified as
export of services during the periods in dispute.
Consequently, the service tax demands of Rs.6,91,329/- and
Rs.14,476/-, together with consequential interest and
penalties, are unsustainable. We further hold that the
invocation of the extended period of limitation in respect of
the first demand is not sustainable.

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35. Accordingly, the impugned Order-in-Appeal
No.27/2016 dated 04.05.2016, and Order-in-Appeal
No.57/2016 dated 20.09.2016, are set aside. Thus, the
Service Tax Appeal Nos. ST/41517/2016 and ST/42199/2016
are allowed with consequential relief, if any, in accordance
with law.
(Order pronounced in open court on 31.08.2026)





Sd/- Sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)

MK