Commissioner wrongly rejected service tax payment under reverse charge mechanism for foreign consultancy services worth Rs. 6.57 crore

CESTAT NEW DELHI held that the Commissioner erred in rejecting appellant's contention regarding service tax payment of Rs. 6,56,79,014/- under reverse charge mechanism for foreign consultancy services. The appellant had paid service tax on foreign remittances for consulting engineer services from overseas providers, with proper accounting code entries (00440057) and supporting challans. The Commissioner incorrectly dismissed the payment merely because it included contributions from other units of the appellant, despite the demand being based on foreign remittances. The matter was remanded to the Commissioner to properly examine appellant's contention and consider payments made by all units.

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Issues involved: Appeal against order confirming demand of service tax under reverse charge mechanism.

Summary:

Issue 1: Service tax demand on foreign remittances

The appellant filed an appeal against the order confirming the demand of service tax amounting to Rs. 81,41,984/- with interest and penalty, passed by the Commissioner. The appellant had received services from providers outside India during 2013-14 and paid service tax under reverse charge mechanism. A show cause notice was issued proposing a demand of Rs. 14,58,79,302/- on foreign remittances. The appellant contended that service tax was already paid on a significant portion of the remittances. The Commissioner confirmed a demand of Rs. 81,41,984/- stating that the appellant did not provide invoice-wise details correlating with the remittances mentioned by the bank. The appellant argued that the demand was based on a list provided by the bank, which included remittances of different units of the appellant. The matter was remitted to the Commissioner for further examination.

Issue 2: Burden of proof and nature of services

The appellant argued that the burden to prove taxability was on the Department and had not been discharged. They contended that the show cause notice did not clarify the nature of services received, the existence of service providers, or agreements for the alleged services. The Department, however, supported the order, stating that the appellant failed to provide invoice-wise details during proceedings. The appellant maintained that they had regularly paid service tax on foreign remittances and reflected it in their returns. The appellant's submission was that the demand was solely based on a list from the bank, which included remittances of different units. The matter was remitted for further examination by the Commissioner.

Conclusion:

The appeal was disposed of, and the matter was remitted to the Commissioner for a fresh order considering the appellant's contentions regarding payment of service tax on foreign remittances by different units. The appellant was granted liberty to file detailed submissions on this aspect for the Commissioner's review.

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