2017 (2) TMI 1151 - AT - Service Tax

Tribunal rules in favor of appellant, sets aside Rs. 24.49 lakhs demand; Rs. 46.26 lakhs issue remanded for verification.

The tribunal set aside the demand of Rs. 24.49 lakhs as the appellant was not liable for service tax payment related to services provided by its ... Liability of service tax for non-resident service provider - separate legal personality of holding and subsidiary companies - service receiver liable to discharge tax where non-resident provider has no office in India - production of original invoices and TR-6 challans for proof of payment and CENVAT credit - remand for verification and de novo adjudicationLiability of service tax for non-resident service provider - separate legal personality of holding and subsidiary companies - service receiver liable to discharge tax where non-resident provider has no office in India - Whether the appellant (holding company) is liable to pay service tax for services rendered by its UK subsidiary PWCDA to KPTCL - HELD THAT: - The Tribunal held that although PWCDA London is a subsidiary of the appellant, the holding and subsidiary are separate legal entities and the appellant's Indian office cannot be treated as the local address of the UK subsidiary. Applying the Circular of the Tax Research Unit (para 2.9.2) which states that where a non-resident service provider has no office in India the service receiver in India is liable to pay service tax, the Tribunal found that the appellant, not being the service receiver of the services rendered by PWCDA to KPTCL, cannot be fastened with the service tax liability. The earlier discharge of tax by the appellant under an authorization from PWCDA and the subsequent withdrawal of that authorization do not alter the legal position that liability rests with the service receiver where the provider is non-resident. [Paras 6, 8]Demand of service tax amounting to Rs. 24.49 lakhs made on the appellant is set aside.Production of original invoices and TR-6 challans for proof of payment and CENVAT credit - remand for verification and de novo adjudication - Validity of the demand of service tax of about Rs. 46.26 lakhs in respect of ERP/SAP services where originals were not produced during investigation - HELD THAT: - The Tribunal recorded that the demand arose because the appellant could not produce original invoices and TR-6 challans at the time of investigation to substantiate payment of service tax and entitlement to CENVAT credit. The appellant now seeks to produce the original documents. With the Revenue not opposing, the Tribunal remanded this issue to the original adjudicating authority for verification of the original documents and for a de novo decision. The remand requires that the appellant be given an effective opportunity to furnish relevant documents and any additional admissible evidence. [Paras 7, 8]Matter relating to the demand of Rs. 46.26 lakhs is remanded to the original adjudicating authority for verification and de novo adjudication.Final Conclusion: The demand of Rs. 24.49 lakhs is set aside; the demand of Rs. 46.26 lakhs is remanded to the original adjudicating authority for verification of original documents and de novo decision, with an opportunity to the appellant to produce evidence. Issues:1. Liability for service tax payment by the appellant in relation to services provided by its subsidiary, PWCDA, London to KPTCL.2. Demand of service tax amounting to Rs. 24.49 lakhs and Rs. 46.26 lakhs for services rendered by PWCDA and ERP/SAP services respectively.Analysis:Issue 1: Liability for service tax payment by the appellantThe appellant, a Management Consultant, was alleged to have evaded service tax payment by suppressing the value of taxable services provided by its subsidiary, PWCDA, London. The demand of Rs. 24.49 lakhs was based on the services rendered by PWCDA to KPTCL. The appellant argued that as a non-resident service provider, PWCDA should have been liable for service tax payment, not the appellant. The appellant had initially discharged the service tax obligation on behalf of PWCDA until PWCDA withdrew the authorization. The Circular No.59/8/2003 clarified that in such cases, the service receiver in India is liable to pay service tax. The tribunal held that the appellant cannot be considered the service receiver and therefore, the demand on the appellant was unjustified.Issue 2: Demand of Rs. 24.49 lakhs and Rs. 46.26 lakhsThe demand of Rs. 46.26 lakhs was for ERP/SAP services provided before 10.9.2004. The appellant had difficulty producing original documents at the time of investigation but later claimed to be able to provide them. The tribunal agreed to remand this issue for verification. However, the demand of Rs. 24.49 lakhs was set aside as the appellant was not liable for the service tax payment related to services provided by PWCDA. The tribunal directed the original adjudicating authority to reevaluate the demand of Rs. 46.26 lakhs based on the original documents to be submitted by the appellant.In conclusion, the tribunal set aside the demand of Rs. 24.49 lakhs and remanded the issue of Rs. 46.26 lakhs for further verification and decision by the original adjudicating authority.