Service tax on foreign employee training denied where employees paid the institute directly and employer only reimbursed the fees.

Service tax was held not payable on commercial training obtained abroad by employees in their individual capacity where the employees directly paid the foreign service provider and the employer merely reimbursed them. The demand was tested against the Finance Act, 1994, the Service Tax Rules, 1994, and the Board circular on employer-hired coaching services. Because the coaching was wholly rendered and received outside India, and the employer had not made the payment to the institute, the legal fiction for services partly performed in India did not apply. The argument under Section 66A was therefore unnecessary to decide, and the Revenue's appeal failed.

---

---

Issues: Whether service tax was payable on commercial training services availed abroad by employees in their individual capacity, where the training fees were first paid by the employees to the foreign service provider and later reimbursed by the employer.

Analysis: The demand was examined in the context of the service tax scheme under clause (105) of Section 65 of the Finance Act, 1994, Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, and the Board circular on employer-hired coaching services. The decisive factual feature was that the employees obtained the coaching abroad as individuals and made the payment directly to the foreign institute. The employer did not make payment to the coaching centre; it only reimbursed the employees. The legal fiction relied upon for services partly performed in India did not apply because the service was wholly rendered and received outside India, and service tax was treated as leviable on services provided within India. The impugned demand therefore could not be sustained, and the argument based on Section 66A of the Finance Act, 1994 was unnecessary to decide.

Conclusion: Service tax was not payable on the training services in the facts of the case, and the Revenue's appeal failed.

---