2020 (1) TMI 635 - AT - Service Tax

Appellate tribunal affirms decision on service tax & penalty, clarifies service rules

C.C.E. & S.T. -Vadodara -ii Versus M/s. General Motors India Pvt. Ltd.

The appellate tribunal upheld the impugned order, dismissing the appeal against the dropping of service tax payment and penalty imposition. The judgment ... Place of provision of service - Export of services or not - POPOS Rules - SCN alleged that the respondents provided the taxable services to GMGTO which were actually consumed in India and not abroad and the same cannot be considered as export of service in terms of Rule 3(2)(a) of Export of Service Rules 2005 (up to 30.06.2012) and Rule 6A of the Service Tax Rules, 1995 (with effect from 1.07.2012). HELD THAT:- The SCN alleges that the services are used by the respondent in India. The use of service provided by the respondent to GMGTO is the only issue which can be subject to service tax, if at all. The manner in which M/s GMGTO used the service thereafter can be a separate transaction by the respondents with GMGTO and would need separate scrutiny. In the present proceedings only the service provided by the respondent to GMGTO is the subject matter of scrutiny. Revenue has sought to rely on Rule 2(i) of the Place Of Provision Of Service Rules, 2012 while relying on Rule 2(i)(b)(ii) the revenue ignores the existence of Rule 2(i)(b)(i) while Rule 2(i)(b)(ii) prescribes that the place of use would be relevant; Rule 2(i)(b)(i) prescribes the location of the business established would be relevant - In the instant case, the business establishment of service recipient namely GMGTO is U.S.A and therefore, the location of service recipient would be U.S.A and not India. Appeal dismissed - decided against Revenue. Issues:1. Appellant challenging dropping of service tax payment and imposition of penalty.2. Whether services provided to GMGTO constitute export of service.3. Interpretation of Place of Provision of Service Rules, 2012.4. Ownership and use of services provided by the respondent.Analysis:1. The appeal was filed against the dropping of service tax payment and penalty imposition by the Commissioner of Central Excise. The appellant argued that the services provided to M/s. General Motor Global Technology (GMGTO) were taxable services used in India, not abroad, thus not qualifying as export of service.2. The agreement between General Motor India Private Ltd. (GMIPL) and GMGTO involved providing engineering services. The appellant contended that the services were used by the respondent in their own premises, making the place of provision of service in India according to the Place of Provision of Service Rules, 2012. However, the respondent argued that the impugned order correctly dropped the proceedings.3. The Commissioner's order highlighted that the services provided by the respondent to GMGTO were owned by GMGTO as per the agreement terms. The ownership of deliverables and the purpose of the agreement indicated that GMGTO was the service recipient. The Commissioner emphasized that the use of services by the respondent in India was the only taxable issue, while any subsequent use by GMGTO would require separate scrutiny.4. The Commissioner also noted the respondent's defense that no element of service exists when services are rendered to oneself. This defense was not challenged in the appeal, leading to the dismissal of the appeal. The judgment emphasized the importance of distinguishing between the service provided to GMGTO and any subsequent transactions between the respondent and GMGTO.In conclusion, the appellate tribunal upheld the impugned order, dismissing the appeal against the dropping of service tax payment and penalty imposition. The judgment clarified the interpretation of the Place of Provision of Service Rules, ownership of services provided, and the distinction between service provision and subsequent use.