2015 (10) TMI 2157 - AT - Service Tax

Tribunal rules in favor of appellant, overturning service tax liability order for services to Tata Johnson Ltd.

Tata Technologies Ltd. Versus Commissioner of Central Excise, Pune 1

The Tribunal set aside the order demanding service tax liability for services rendered to Tata Johnson Ltd., ruling in favor of the appellant. It was ... Liability of Service Tax on deemed export of services rendered to sister concern which is 100% EOU – Claimed exemption under Notification No. 21/2003-ST – Appellant contends that services provided to sister concern are secondary services and same are not leviable to service tax as per CBEC circular No. 56/5/2003-ST – Revenue contends that circular is not applicable in absence of any evidence – Held That:- Services rendered have been declared as export of services in cases such as SGS India Pvt. Ltd. [2011 (2) TMI 54 - CESTAT MUMBAI] and Repro India Ltd. Vs UOI [2007 (12) TMI 209 - BOMBAY HIGH COURT] and service tax is not leviable on them – Issue is no more res-integra; we hold that impugned order is unsustainable and liable to be set aside – Decided in favour of assessee. Issues:1. Demand of service tax liability for services rendered to Tata Johnson Ltd.2. Applicability of Notification No. 21/2003-ST dated 20-11-2003 for exemption.3. Interpretation of circular No. 56/5/2003-ST dated 25-04-2003 regarding services rendered by Secondary service provider.4. Qualification of services rendered to Tata Johnson Ltd. as Export of Services.Analysis:Issue 1: Demand of service tax liability for services rendered to Tata Johnson Ltd.The appeal was against the Order-in-Appeal No. PI/RKS/168/2010 dated 30/09/2010, where it was observed that the appellants provided CAD/CAM/CAE engineering and designing services to Tata Johnson Controls Automotive Ltd. without paying the tax liability. The appellants claimed exemption under Notification No. 21/2003-ST dated 20-11-2003, which exempts taxable services from tax if not repatriated outside India. However, since the appellants received all payments in Indian currency, they did not meet the conditions of the notification, rendering the exemption unavailable.Issue 2: Applicability of Notification No. 21/2003-ST dated 20-11-2003 for exemptionThe show cause notice was issued for the demand of service tax liability, interest, and penalties, which was contested on merits and limitation. The adjudicating authority confirmed the demand and imposed penalties, which was upheld by the first appellate authority. The demand was for the period from 20-11-2003 to 2-3-2006, with the argument that services provided to Tata Johnson were used for exporting services, citing a circular by the Central Board of Excise and Customs.Issue 3: Interpretation of circular No. 56/5/2003-ST dated 25-04-2003The appellant relied on a circular stating that if services rendered by a secondary service provider are ultimately consumed for services being exported, no service tax is leviable. However, the departmental representative argued that there was no evidence that the services provided to Tata Johnson were used for exporting services, making the circular inapplicable in this case.Issue 4: Qualification of services rendered to Tata Johnson Ltd. as Export of ServicesUpon review of the records, it was found that the services provided by the appellant to Tata Johnson were for the development of software used by Tata Johnson for services to overseas customers. The appellant had produced documents supporting this claim, and it was noted that Tata Johnson was a 100% E.O.U. The Tribunal referred to previous judgments and settled law to determine that the services rendered by the appellant to Tata Johnson qualified as Export of Services, leading to the impugned order being set aside and the appeal allowed.