CESTAT allowed the appeal and set aside the demand against the...

CESTAT allowed the appeal and set aside the demand against the appellant (a domestic affiliate), holding that the taxable event for services performed beyond India's territorial waters did not arise against the appellant. The Tribunal found single contracts partly performed offshore and partly onshore; valuation may include total consideration where services provided from outside India are received in India, and the applicable rate is 12%. However, by operation of section 66A the statutory liability lay on the Indian service recipients, who must pay service tax as if they were the providers when the actual provider is located outside India. The tax demand against the appellant was therefore unsustainable and was quashed.

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