TaxTMI 
TaxTMI 
2015 (12) TMI 415
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....Inc., USA, entered into service agreements with its group companies for providing support services to them. (ii) Under clause 7 of the agreement, it reimbursed the out of pocket expenses on actual basis. In addition to the reimbursement of expenses, it also paid fees on the basis of actual costs, viz., salaries and allowances, moving and relocation, service charges for use of assets and staff welfare expenses and 5% mark up on such actual costs. (iii) For rendering such services, service charges on account of salary and allowances including P.F., moving and relocation, etc., along with a mark up of 5% is made and then on the total amount, service tax was paid to Revenue. Similarly, it also incurred expenses, which were in the nature of reimbursement, to be claimed on actual basis without any mark up and even on that, it charged service tax and paid to Revenue. (iv) In the notes to accounts for the year 2010-11 para 6(a) from where the figures for office premises is taken, it was clearly mentioned that lease payments for taking premises on lease for the year were Rs. 5,58,66,278/- (previous year Rs. 5,99,70,317/-). These payments were recovered from the user entities. Consequently....
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....been collected and deposited in the Govt. account. Similar notes were appearing in the balance sheets for the years 2996-07 to 2009-10. 3. Regarding foreign exchange payments, the appellant pleaded that (i) In order to attract the provisions of Section 66A of the Finance Act, 1994, first there must be a receipt of taxable service by the appellant from a foreign service provider, secondly, the money should have been paid in foreign currency and thirdly, the conditions mentioned in the Import of Service Rules, 2011 must be satisfied to attract service tax at the hands of the Indian appellant under reverse charge mechanism. No examination has been made by the Commissioner as to whether there was a taxable service rendered by foreign service provider to the appellant. All the foreign exchange expenses of the appellant have been treated as being for import of taxable services by the appellant without any basis. In the present case, all payments made by the appellant in foreign exchange did not relate to import of taxable services. The appellant explained that the foreign exchange expenses as under:- Sl. No. Nature of activity Taxable/Non-taxable Reason for treating services non-tax....
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.... confirmed the demand essentially observing as under:- "38.4 In this connection, I observe M/s. CCII has not submitted copies of the relevant lease agreements so the factual position in this regard could not be examined. Further, as per notes of accounts lease payments made by them have been recovered from some user entities. In case the properties taken on lease were used by M/s. CCII themselves for providing services to their group companies from whom reimbursements were made (on which they have claimed to have paid appropriate service tax as part of their service cost) then in such situation, question of recovery of amount from some other user entity cannot arise. Therefore, it becomes quite clear that recovery of amounts from some other user entities can be made only on account of renting of some properties. In such circumstances the demand of service tax under "Renting of Immovable Property Service" as mentioned in the instant Show Cause Notice is very well sustainable and I hold it accordingly." "38.7 In this regard M/s CCII has contended that these payments recovered from the group companies are included in the account of "Salaries and allowances" which has b....
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....d therein" and in these circumstances, the contentions of the appellant cannot be acceded to. In this regard it is pertinent to note that the onus of establishing that the immovable properties/vehicles were actually given on lease (sub-lease) by the appellant is on Revenue and as contended by the appellant, we also do not find any evidence to the effect that the appellant had given the immovable properties or the vehicles on lease or sub-lease to its officials. Indeed from the submissions of the appellant, it is clear that it had taken vehicles on lease and therefore was recipient of service and not provider thereof. Further, the appellants contention that it has already paid appropriate service tax on the reimbursement recovered from its group companies [which included reimbursement towards lease rent paid by it for immovable property or towards the provision of vehicles for its officials (reckoned in the salary and allowances)] for providing service to its group companies has not been questioned by the adjudicating authority. In fact, the adjudicating authority has already dropped demand of Rs. 9,17,06,862/- relating to salary and allowances, moving and relocation, service char....
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....on of Hon'ble Supreme Court in case of Indian National Ship-owners Association (2010) 24 STT 366 (SC). Therefore, demand of service tax amounting to Rs. 18,74,543/- on an amount of Rs. 18,377,873/- (@10.20%) merits to be dropped and I hold it accordingly." As is evident from the foregoing, the adjudicating authority has not identified any taxable service for which service tax is liable to be paid under reverse charge mechanism. We find that while service tax under reverse charge mechanism has been confirmed on the foreign currency expenditure, there is not even a whisper in the adjudication order as to what were the taxable services received by the appellant from abroad to make it liable to pay service tax under reverse charge mechanism. For levying of service tax under reverse charge mechanism, Revenue has to first identify the taxable service received from abroad for which payment was made in foreign currency, which, as seen from the paragraphs of the impugned order quoted above, has not been done at all. This is clearly fatal. It can be nobody's case that any amount spent in foreign exchange is liable to service tax under reverse charge mechanism; such expenses have to be s....