2013 (3) TMI 420 - Commissioner - Service Tax

Appeal allowed, appellant exempt from Service tax liabilities. Services to SEZ units exempt. Software sale not taxable.

IN RE : PricewaterhouseCoopers PVT. LTD.

The appeal was allowed, and the appellant was exempted from Service tax liabilities on all three counts. The judgment clarified that services rendered to ... Utilization of services in SEZ - Exemption under Notification No. 4/2004-S.T. - Services rendered were not consumed within the Special Economic Zone - No Service Tax on the software used for rendering the service - Rule 3(2) of the Export of Services Rules - Demand, interest & penalty under sec. 73(1), 75 & 76 of the Finance Act, 1994 - Held that:- It is evident that the service of the appellant was utilized by these units only for SEZ operations and are consumed within the SEZ. It is also seen that in the instant case the Lower Adjudicating Authority has not disputed the fact of utilization of services by the SEZ units. If that be the case, then it clearly amounts to consumption of services within SEZ. Hence, I hold that the appellant is eligible for Service tax exemption under Notification No. 4/2004-S.T - Decided in favor of assessee. Issues Involved:1. Liability to pay Service tax on services rendered to SEZ units.2. Inclusion of the value of software sold to M/s. Landmark in the taxable value for Service tax.3. Liability to pay Service tax on service charges received in foreign currency from M/s. Pricewater, Colombo.Issue-wise Detailed Analysis:(i) Liability to pay Service tax on services rendered to SEZ units:The appellant contended that services rendered to SEZ units are exempt under Notification No. 4/2004-S.T. The Lower Authority denied this exemption, arguing that the services were not consumed within the SEZ. However, the judgment clarified that SEZs are deemed foreign territories for trade purposes and that services provided to SEZ units are ultimately consumed within the SEZ. The SEZ Act has an overriding effect, and the appellant's services were utilized exclusively for SEZ operations. Hence, the appellant is eligible for Service tax exemption under Notification No. 4/2004-S.T. for services rendered to SEZ units.(ii) Inclusion of the value of software sold to M/s. Landmark in the taxable value for Service tax:The appellant argued that the software purchase was a sale of property, attracting CST, and should not be included in the taxable value for Service tax. The judgment agreed, noting that the appellant paid Service tax for professional services rendered to M/s. Landmark. Since the software sale is distinct and the sale suffered CST, it cannot be included in the taxable value for Service tax. Therefore, the appellant is not liable to pay Service tax on the software's value.(iii) Liability to pay Service tax on service charges received in foreign currency from M/s. Pricewater, Colombo:The Department alleged that the appellant did not fulfill conditions under Rule 3(2) of the Export Service Rules, 2005, as the service was rendered in India. The judgment found that the appellant provided services under a contract with M/s. PricewaterhouseCoopers Lanka Pvt. Ltd., and received payment in foreign currency. Though the work related to Assam Governance, the service was delivered and used outside India, meeting the export of service criteria. Consequently, the appellant is not liable to pay Service tax on the foreign currency received from M/s. Pricewater, Colombo.Conclusion:The impugned Order-in-Original was set aside, and the appeal was allowed, exempting the appellant from Service tax liabilities on all three counts.