2024 (12) TMI 285 - AT - Service Tax

Service tax demand of Rs.24 lakh rejected for Business Auxiliary Services to foreign entity qualifying as export

M/s. Eldyne Electro Systems Private Limited Versus Commissioner of Service Tax, Service Tax Commissionerate, Kolkata

M/s. Eldyne Electro Systems Private Limited Versus Commissioner of Service Tax, Service Tax Commissionerate, Kolkata - TMI Issues Involved:1. Demand of Service Tax under various categories.2. Appropriation of Service Tax payments.3. Applicability of Export of Services Rules, 2005.4. Liability for interest and penalties.5. Invocation of the extended period of limitation.Issue-wise Detailed Analysis:1. Demand of Service Tax under Various Categories:The Appellant was issued a Show Cause Notice alleging non-payment of Service Tax amounting to Rs.3,68,35,466/- for services rendered from 2007-08 to 2011-12, including 'Consulting Engineer's Service', 'Business Auxiliary Services', 'Commercial Training or Coaching Services', 'Erection, Commissioning or Installation Service', and 'GTA Service'. The Appellant contested the demands under 'Business Auxiliary Services' and 'Commercial Training or Coaching Services' while accepting the liability under other categories.2. Appropriation of Service Tax Payments:The Appellant had paid Rs.3,39,72,906/- towards Service Tax for 'Consulting Engineer's Service', 'Erection, Commissioning or Installation Service', and 'GTA Service'. The Tribunal observed that the entire payment was acknowledged by the adjudicating authority and should be appropriated against the Appellant's liability under these categories.3. Applicability of Export of Services Rules, 2005:For 'Business Auxiliary Services', the Appellant argued that services rendered to an entity outside India qualify as 'export of service' under Rule 3(1)(iii) of the Export of Services Rules, 2005, as the service receiver is located outside India. The Tribunal agreed, holding that no service tax is payable on these services.For 'Commercial Training or Coaching Services', the Appellant contended that training received abroad is not liable for service tax in India. The Tribunal upheld this view, setting aside the demand under this category.4. Liability for Interest and Penalties:The Tribunal found no suppression of facts with intent to evade tax, noting that the demand was based on information from the Appellant's financial records. Consequently, the extended period of limitation was not applicable. The Tribunal waived the interest for the extended period but upheld the interest for the normal period, which had already been paid by the Appellant.Regarding penalties, the Tribunal set aside the penalty under Section 78 of the Finance Act, 1994, due to the absence of mala fide intent. However, penalties under Section 77(1)(a) and Section 77(2) for non-registration and non-filing of returns were upheld.5. Invocation of the Extended Period of Limitation:The Tribunal determined that the extended period of limitation was not applicable due to the lack of suppression of facts. The Appellant had paid the service tax for the extended period voluntarily and agreed not to seek a refund, leading to the waiver of interest for this period.Conclusion:The Tribunal upheld the demand of Service Tax for 'Consulting Engineer's Service', 'Erection, Commissioning or Installation Service', and 'GTA Service', while setting aside the demands for 'Business Auxiliary Services' and 'Commercial Training or Coaching Services'. Interest for the normal period was upheld, and penalties under Section 77 were maintained, but the penalty under Section 78 was set aside. The appeal was disposed of on these terms.