TaxTMI 
TaxTMI 
2019 (8) TMI 1030
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....llowing services:- (i) Rs. 65,93,940/- out of Service Tax amounting to Rs. 79,08,692/- under Business Auxiliary Service for the period from 01.07.2004 to 31.03.2008. (ii) Rs. 1,44,71,931/- out of Service Tax amounting to R%s 3,18,89,501/- under Franchise Service for the period 2006-07 to 2007-08. (iii) Rs. 8,41,354/- out of Service Tax amounting to Rs. 43,87,707/- under Consulting Engineer Service for the period from 2006-07 to 2007-08. (iv) Rs. 55,555/- out of Service Tax amounting to Rs. 2,21,770/- under Technical Testing and Analysis Service for the period 2006-07 to 2007-08. 82.2 I order recovery of interest at the appropriate rate, on the amount confirmed as at para 82.1 (i to iv) above, from the due date(s), under the provisions of Section 75 of the Finance Act, 1994, from M/s Owens Corning (India) Ltd Raigad 410208; 82.3 I impose a penalty under Section 76 of the Finance Act, 1994 in respect of Business Auxiliary Service on M/s Owens Corning (India) Ltd Raigad 410208, as it existed at material time, on the amount confirmed as at para 82.1(i) which shall be:- (i) Rs. 200/- for every day on the Service Tax liabilit....
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....eady been discharged by them by treating the transactions as one under the category of Intellectual Property Service as has also been noted in para 3.10 & 3.11 of Show Cause Notice. Since the Service Tax has been paid by them under one category of service, the demand made under another category should have been adjusted against the amount paid as per the CBEC Circular No 58/2003-ST dated 20.05.2003 and decision of tribunal in case of Air Charter Services P Ltd 2017 (5) GSTL 107 (T-Del)]. (iii) They have paid the service tax on Franchise Service, Consulting Engineer Service and Technical Testing & Analysis Services on reverse charge basis and have also taken the CENVAT Credit of the same. Availment of CENVAT Credit has not been objected by the revenue. They do not intend to seek the refund of the same. However since the situation is totally revenue neutral extended period and consequent penalties are not imposable on them as has been held in the following cases: • Jet Airways (I) Ltd [2016 (44) STR 465 (TMum)] • Jain Irrigation Systems Ltd [2015 (40) STR 752 (T-Mum)] • JPP Mills Ltd [2013-TIOL-1643-CESTAT-MAD] • Tvl Kasi a....
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....rt of Service Rules, 2005, following three conditions need to be satisfied for treating the Business Auxiliary Services to be exported out of India_ • The recipient of services is located outside India; • Such service is delivered outside India and used outside India. • Payment for such services provided is received in convertible foreign exchange. (viii) Since they satisfy all the three conditions the benefit of export of services should have been extended to them as has been held in following decisions:- • Paul Merchants Ltd [2013 (29) STR 257 (TDel)] • ATR Enterprises Pvt Ltd [2015 (39) STR 81 (TMum) • Blue Star Ltd [2016 (46) STR 59 (T-Mum)] (ix) Service Tax is destination based consumption tax, and the recipient of the service is outside India, thus no service tax is leviable in India, even without exemption or Export of service benefit. CBEC has clarified so by Circular Date d 25.04.2003, and same was stated in the Finance Minister speech in the parliament. (x) It is well settled position that service tax is leviable only if services are consumed within India as held in ca....
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....appellant. v. The services provided by the appellant under this category to OCA HK and OCA A were in respect of the sale of the goods in India. Hence the services provided cannot be said to be export of services as the benefit of the said service had accrued to OCA HK and OCA A in India. The decision in case of Paul Merchants relied upon by the appellants will not be applicable in the present case as the periods covered by that decision is different from the period involved in the present case. vi. The extended period of limitation as provided by the proviso to Section 73(1) is applicable in the present case as the appellants have not filed the relevant details of the services provided to the OC HK and OC A in the ST-3 returned filed by them. vii. Penalties under various provisions Finance Act, 1994 are for various acts of omission and commission and since they have violated the various provisions of Finance Act, 1994 and Rules made thereunder, penalties on them under Section 76 and 77 are justified. Also for their act leading to evasion of Service Tax the penalties under section 78 to are justified. 3.1 We have considered the impugned order along with....
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....nter for technical consultation or training on problems relating to the commercial production of Glass products with the aid of OC-USA Patents and OC-USA Know-How. The notice have admittedly stated in their reply that the notice used the technology given by OC-USA. 49. Therefore, in the instant case, OC-USA is the franchisor who has granted representational rights under the category of 'Franchise Service' to the notice who is the franchisee. Hence, OC-USA has provided the said taxable service for which they are liable to pay service tax on the amount received from the notice. But as the service provider in the instant case is a foreign company who is not having office or fixed establishment in India, as per Rule 2(1)(d)(iv) of Service Tax Rules, 1994 read with Section 66A the notice as a service receiver is liable to pay service tax on the royalty amount paid to the foreign service provider during the disputed period. However, going by the discussions held earlier in this regard, the notice is liable to pay Service Tax for the period from 18.04.2006 to 31.03.2008. This notice have claimed that the royalty paid for transfer of technology is not chargeable to Service Tax und....
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....ioner. 3. The field formations may suitably be informed. 4. Trade Notice may be issued for the information of the trade. 5. The receipt of this Circular may kindly be acknowledged. 6. Hindi Version will follow. Manish Mohan Under Secretary to the Government of India 3.5 In case of Air Charter Services P Ltd [2017 (5) GSTL 107 (Tri Del)] tribunal has approved the order of Commissioner allowing the adjustment of tax paid under one category of taxable service with the tax demand under other category stating as follows: "9.We note that the adjudicating authority in para 45.8 of the impugned order has tabulated the relevant details of gross turnover and service-wise consideration received by the respondent. Such tabulation is duly certified and supported by the Chartered Accountant after verifying the books of accounts of the respondents. The adjudicating authority has given the relief in the service tax only to the extent of amounts which are not to be considered as part of the consideration. The fact that he has taken the support of Chartered Accountant certificate for verification of the figures cannot by itself be taken as a grou....
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.... repair. Consequently, we find no reason to interfere with the finding of the Commissioner dropping the demand of Service Tax in this category. 12.The adjudicating authority has held that the activities undertaken by the respondents would be rightly classifiable under 'Supply of Tangible Goods for Use' Service. He has also confirmed the demand of service tax under the above service. It is also pertinent to record that the entire service tax demand has also been paid by the respondent along with interest partially through cash and partially by availing of Cenvat credit which has been regularized by the Commissioner in the impugned order. The Only point on which the Revenue is aggrieved is that the adjudicating authority has refrained from imposing any penalty under various sections of Finance Act, 1994, even though the demand itself has been confirmed on the basis of show cause notice issued invoking the proviso to Section 73(1). The adjudicating authority has given detailed reasons for not imposing the penalty and the same are reproduced below :- "Whether the assessee is liable for penalty under Sections 76, 77 and 78 of the Act. 48. In this regard, I fin....
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....ssee is entitled for the benefits of waiver of penal action as was available under Section 73(3) of the Act, during the period under dispute. Therefore, I do not propose any penal action against the assessee under sections 76, 77 and 78 of the Act, and I hold it accordingly." 13. After going into the detailed reasons given by the adjudicating authority and the case law relied by him, we are of the view that this is not a fit case for imposition of penalty. The supply of tangible goods service was introduced with effect from 16-5-2008. We note that the demand for service tax in this case has arisen for the periods immediately after the introduction of this service when the activities covered under these services were being debated and settled by various judicial forum. We also note from the records of the case that the respondent has disputed the classification of their activity under the supply of tangible goods service. However, during the course of investigation they were convinced and they have discharged the entire service tax liability along with interest. Keeping these circumstances in view, we are convinced that this is a fit case to waive all the penalties under th....
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....nder the said notification stating that appellants have not substantiated their claim under the said notification. The text of the Notification is reproduced below:- "In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services specified in sub-section (105) of section 65 of the said Act, provided to any person in respect of which payment is received in India in convertible foreign exchange, from the whole of the service tax leviable thereon under section 66 of the said Act. Provided that nothing contained in this notification shall apply when the payment received in India in convertible foreign exchange for taxable services rendered is repatriated from, or sent outside, India." In our view the above notification exempts all the payments received by a person in connection to taxable service rendered in convertible foreign exchange. Commissioner has in his order not denied the admissibility of the benefit of said exemption notification but has only stated that appellants have failed to substantiate their cl....
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....come Tax Act, 1961, in respect of foreign entities providing the services of commission agent to Indian Companies for the sale of goods outside India, Hon'ble Supreme Court laid down the law as follows: "In the instant case the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by clause (a) of the Explanation to section 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India. The High Court was, therefore, right in answering the question against the Department." Applying the above ratio in respect of selling agents, selling the goods of foreign entity in India, the services rendered for sale of goods in India, cannot be anything but the services rendered in India, even if the sale proceeds of the said goods accrue to foreign entit....
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....to an agreement with M/s. Western Union Network Ltd., Ireland a company engaged in money transfer from persons located in one country to persons located in any country. PML was executing part of the activities, in territory assigned to PML in India, necessary for Western Union to carry out its business. The contract entered into between the two parties deals with remittances from persons abroad to persons located in India as well as remittances from persons located in India to persons located outside India. However it is affirmed by PML that they have not done any business of the latter type because such business requires permissions from RBI which they have not got. So it is asserted that the dispute before the Tribunal is in relation to remittance from persons abroad to persons in India. This statement is not contradicted by Revenue. In this business the person located abroad approaches any of the offices of the Western Union or its agents and give money to be remitted to a person in India. The office abroad charges the person abroad commission for remitting money to India. They convert the foreign exchange into Indian rupees and pay the recipient in India following a system to e....
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.... in respect of the goods of these foreign entities sold by them in India. Thus services provided by the appellant facilitate the conduct of business of the Foreign Entities in India. In our view the decision of Tribunal in case of Paul Merchant is distinguishable and not applicable to the facts of this case. The decisions of tribunal in case of ATR Enterprises Pvt Ltd [2015 (39) STR 81 (T-Mum)] and Blue Star Ltd [2016 (46) STR 59 (TMum)], relying on the decision of Paul Merchant too are distinguishable. 3.13 There is no dispute about the fact as has been held by various decisions that service tax is destination based consumption tax. However for application of the said principle, the foremost condition is to determine the place of "destination based consumption". If the place of consumption of service is in India then the service tax is leviable and if the place of consumption is outside India the services are treated as export. In the present case when we find that the services have been consumed in India, we do not find any merits in the submission made by the appellant, that the services provided by them were "export of services". Thus reliance placed by the appellants on (i)....
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....[Amount Rs. 55,555/-] Demand on services received by the appellant from overseas service providers under the category of Franchise Services. [Rs. 1,44,71,931/-] Matter remanded for verification of the fact about payments made by the appellant under category of "Intellectual Property Right Service". Penalties set aside extending the benefit of section 80. Demand of service tax under the category of Business Auxiliary Services [Rs. 65,93,940/-] Matter for the period 9.07.2004 to 14.03.2005 remanded to adjudicating authority. Demands and penalties upheld for the period 15.03.2005 to 3.03.2008. 4.1 Appeal filed by the appellants is partially allowed as indicated in para 3.19 above. (Order pronounced in the open court on 21.08.2019) ============= Document 1 58. Now, the only issue that has remained to be considered is whether the 'Business Auxiliary Service' provided by the noticee as indenting agents is chargeable to Service Tax or not. The Show Cause Notice alleges that OCIL provided service as indenting agent to OC- Hongkong and OC-Australia for selling their products to their customers in India and received commercial consideration in the form of c....
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....is not applicable on export of services. Export of services would continue to remain tax-free even after withdrawal of notification no. 6/99 dated 9.4.99. So export of services was not taxable with or without an exemption notification.. 'Business Auxiliary Service' came into Service Tax net with effect from 01.07.2003. The Board brought back a revised edition of Notification No. 6/99 in the form of Notification No. 21/2003 dated 20.11.2003, which exempted all taxable services specified in sub-section (105) of section 65 of the said Act, provided to any person in respect of which payment is received in India in convertible foreign exchange, from the whole of the service tax, provided the payment received in India in convertible foreign exchange for taxable services rendered is not repatriated from, or sent outside, India. In the instant case, admittedly, the noticee were acting as Commission agents/Indenting Agents, thereby providing 'Business Auxiliary Service' to OC HK and OC Australia for sale of their glass products throughout India; the said services were effectively used and enjoyed in India. Place of provision and place of consumption....
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....f Service Rules, 2005 in the light of the various Notifications issued/amended from time to time under the said Rules. > As per Notification No.9/2005 ST dated 3.3.2005 (effective from 15.03.2005), Provided that if such recipient has any commercial or industrial establishment or any office relating thereto, In India, such taxable services provided shall be treated as export of services only if- (a) order for provision of such service is made by the recipient of such service from any of his commercial or industrial establishment or any office located outside India; (b) service so ordered is delivered outside India and used in business outside India; and (c) payment for such service provided is received by the service provider in convertible foreign exchange; The noticee have not fulfilled the condition (b) of the said Notification that the services so ordered have been delivered and used in business outside India. The Export of Service Rules, 2005 was amended vide Notification No.13/2006 ST dated 19.04.2006. Document 4 Under this Notification, the clause (a) of Notification No. 2/2007-ST dated 01.03.2007 remaining unchanged, the noticee ....
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....he exemption was restricted to commission agent in relation to sale or purchase of Agricultural produce only. The fact that the noticee provided 'Business Auxiliary Service' as commission agents during the period eligible for the said exemption is not under dispute. Therefore, I find force in noticee's claim and accordingly allow the benefit of exemption to the noticee under Notification No.13/2003 ST dated 20.06.2003 for the period from 01.07.2003 to 08.07.2004. As the noticee is not involved in sale or purchase of any Agricultural products, the benefit of exemption cannot be extended to them post 09.07.2004. However, this claim of the noticee makes it clear that they were well aware of the nature of 'Business Auxiliary Service' provided by them and their liability towards Service Tax in respect of the said services and deliberately refrained from paying Service Tax. 68. In view of foregoing discussions, I hold that the indenting agent service, classifiable as 'Business Auxiliary Service' under Section 65(105)(zzb) read with Section 65(19) of the Finance Act, 1994, provided by the noticee during the period from 09.07.2004 to 31.03.2008 are....
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.... Thus, each of the sub-clauses getting covered by (a) to (e) of Section 73(1) are independent of each other and existence of any/each one of the individual situation is good enough to attract demand Service Tax for extended period under the proviso clause to Section 73(1). In the Document 6 present case, the Noticee have suppressed the material facts regarding the taxable value under 'Business Auxiliary Service', 'Franchise Service', 'Consulting Engineer Service' and 'Technical Testing and Analysis Service'. The noticee had not taken registration in respect of 'Franchise Service', 'Consulting Engineer Service' and 'Technical Testing and Analysis Service'. In respect of the 'Business Auxiliary Service' provided by them, they have not sought any clarification from the Department regarding their interpretation that the said services were export of services. This clearly indicates that the suppression of the material facts, as above, was deliberate and with intent to evade payment of appropriate Service Tax. 74. Section 73 ibid does not speak specifically about the knowledge gained by the Department. What is relevant for invoking the proviso clause....