TaxTMI 
TaxTMI 
2021 (4) TMI 810
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....mbursement of expenses on the import of services as discussed at Para 5 of the notice under proviso to Section 73(1) Finance Act, 1994 and Section 73(2) of the Finance Act, 1994 (iii) demand the Service Tax amount of Rs. 5,99,09,585/- on income received in foreign currency as discussed at Para 7 of the notice under proviso to Section 73(1) Finance Act, 1994 and Section 73(2) of the Finance Act, 1994 (iv) appropriate interest, on the Service Tax quantified at (i) to (iii) above under the provision of Section 5 of the Finance Act, 1994 (V) penalty of Rs. 10,000/- under Section 77(1)(a) of the Finance Act, 1994 and Rs. 10,000/- under Section 77(2) of the Finance Act, 1994 (vi) penalty of Rs. 43,85,68,253/- on the assessee in terms of Section 78 of the Finance Act, 1994 2. Briefly the facts of the present case are that the appellants are engaged in the manufacturing, trading and maintenance of Automated Teller Machines (ATM) and registered with the Service Tax Department for the taxable services falling in the category of Scientific and Technical Services, ATM Operation Services, Management, Maintenance or....
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....ly, the authorities proposed to demand service tax on import of such services during the period FY 2006-07 to 2010-11, to the tune of INR 22,65,61,831/- along with the applicable interest. b) That on review of Balance Sheet of the Company for FY 2006-07, it was observed that the Company had incurred certain expenses in foreign exchange, categorized as 'Travel and 'Others in the balance sheet, which were related to the 'Professional Services' received under the ISA as referred to supra. As per provisions of Section 67 of the Finance Act, 1994 (hereinafter referred to as 'the Act') read with Rule 5 of the Service Tax (Determination of Value) Rules, 2006, all expenses incurred in relation to provision of main services were includible in the gross value charged for provision of such service, and thereafter, leviable to Service Tax. Accordingly, such expenses incurred are to be included in the value of service referred to supra, and chargeable to service tax under the Reverse Charge Mechanism, under the taxable category of Business Support Services. Similar observation was made for the period FY 2007-08 to 2010-11 as well. The Authorities proposed to demand service ....
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....ted 18.04.2016 the learned Commissioner of Central Excise, Bangalore has confirmed the entire demand raised in the SCN along with interest and equal amount of penalty under Section 78. Aggrieved by the impugned order, the appellant filed the present appeal. 4. Heard both the parties and perused the records of the case. 5. Learned Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts, the law and the binding judicial precedents. He further submitted that in the present case following three issues are involved which are enumerated below: i. Whether the Appellant is liable to pay service tax for Group Company cross charge received from its overseas group company, under BSS category? ii. Whether the Appellant is liable to pay service tax on travel reimbursement paid to its own employees for their overseas business travel? And whether the Appellant is liable to pay service charge on third party vendor cross charge received from the overseas group companies? iii. Whether the Appellant is liable to pay service ....
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....tion, transaction processing, etc. Whereas, in the impugned order at Para 32.6 it is mentioned that the services of overseas parent company are that of higher managerial employees requiring specific business expertise and as per the learned Counsel, these services will not qualify as BSS. Learned Counsel further submitted that there is no finding whatsoever, other than mere assertion made in the impugned order before classifying these services as BSS. It can be seen from the definition of BSS that it contains various services. Neither the SCN nor the OIO clarifies how the services for which cross charge is received will qualify as Business Support Service. It is settled principle in law that the onus to prove taxability is on the revenue. He further submitted that that there was a significant amendment in the definition of BSS with effect from 01.05.2011 and the said amendment was clarified in the CBEC Circular F. No. 334/3/2011-TRU dated 28.02.2011 as under: 5.1 The scope of the service is being expanded to include operational or administrative assistance of any kind. The scope will cover all support activities for others on a contract or fee, that are ongoing busin....
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....oup company towards 3rd party vendors costs engaged at a group level or costs of technical or engineering employees providing IT support and other operational assistance to the Appellant. He further submitted that these are mere pooling of costs to pay to a common vendor or operational or administrative assistance services received and hence not liable to be taxed as BSS for the same reasons stated overleaf. In support of non-taxability of all the above services due to cost sharing nature or in the nature of operational and administrative assistance taxable with effect from 01.05.2011, the Appellant refers to and relies upon the following decisions: a) Reliance ADA Group Pvt. Ltd. vs Commissioner of S.T., Mumbai-IV, 2016 (43) STR 372 (Tri-Mumbai) (page no. 9 of compilation) b) Historic Resort Hotels (Pvt.) Ltd. vs Commissioner of C. Ex., Jaipur-II, 2018 (9) GSTL 422 (Tri-Del.) (page no. 16 of compilation) c) HT Media Ltd vs Commissioner of Service Tax, New Delhi, 2017 (7) GSTL 364 (Tri-Del.) (page no. 18 of compilation) 7.1. As far as the third issue as to whether the appellant is liable to pay service tax on employee-cost cross charg....
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....adodara-II vs Indeos ABS Limited, 2010 (254) E.L.T. 628 (Guj.) (page no. 41 of compilation) 7.3. Learned Counsel also submitted that the confirmation of demand by invoking the extended period of limitation is not sustainable as there has not been any suppression of material facts with intent to evade payment of duty. He further submitted that for the half-year October 2006 to March 2007, the appellant had filed the return on 18.04.2007 and hence the SCN issued on 24.04.2012 is beyond even the extended period of 5 years and thus not sustainable in law. Learned Counsel further submitted that the appellant have been subjected to various audits from time to time and the appellants have submitted the details of foreign exchange expenses including Integrated Services Agreement with the Revenue and the Revenue was in the know of these transactions all the times and therefore the appellant cannot be charged with the suppression or wilful mis-statement and hence the demand for the extended period is not sustainable in the present case. He also submitted that considering the situation revenue neutral, the charge of suppression will not be sustainable against the Appellant as the Appellant....
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....x under Business Support Service category does not bring on record as to how the purported services are covered under Business Support Service category and specifically covered under which limb of the Business Support Service definition. He further submitted that the onus to prove taxability is on the Revenue and without putting the Appellant to specific notice, mere vague allegations and confirmation thereof are not sustainable in law because the SCN is the foundation of litigation and needs to put the Appellant to specific notice. For this submission, he relied upon the following decisions: a) CCE, Bangalore vs Brindavan Beverages - 2007 (213) E.L.T. 487 (S.C.) b) Union of India vs Garware Nylons Ltd., 1996 (87) E.L.T. 12 (S.C.) 7.5. Learned Counsel also submitted that after 1st May 2011, the appellant had started paying service tax under the taxable "Business Support Services" on cross charge payments made to the overseas entity on account of employee's costs or third party vendor costs, under reverse charge mechanism and the revenue has accepted the same. 8. On the other hand, learned AR strongly opposed grant of any relief to the....
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....he relevant definition of Business Support Services as provided in Section 65(104c) which is reproduced herein below: "support services of business or commerce" means services provided in relation to business or commerce and includes evaluation of prospective customer, telemarketing, processing of purchase orders and fulfillment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, [operational or administrative assistance in any manner], formulation of customer service and pricing policies, infrastructural support services and other transaction processing. Explanation- For the purposes of this clause, the expression "infrastructural support services" includes providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, internet and telecom facilities, pantry and security;] 9.2. It is also relevant to reproduce the relevant Circular No.334/4/2006/TRU dated 28.02.2006 and Circular No. 334/3/2011/TRU dated 28.02.2011: 3.13. "Business Sup....
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....bursement on salary cost and other overheads by managerial personnel of NCR overseas group companies, working for NCR group as a whole. Further, as per the appellant, the relationship of service provider and service recipient is missing as per the agreement between the parties. 10.1. We have gone through various clauses of the agreement and we find that in the agreement the nature of services is not specifically mentioned but it provides sharing of cost incurred by the service providers in providing the services. Here it is relevant to reproduce the relevant Para of Integrated Services Agreement relating to cost sharing which is contained in Para 2B of the Agreement and reproduced herein below: "b. Because the Service Recipients directly benefit from the Services, the Fees will include a share of the total costs incurred by the Service Providers in providing the Services, which is proportionate to the benefits each Service Recipient receives from the Service. Additionally, a reasonable mark-up over cost will be included in the Fees to the extent required under internationally-accepted arm's-length standards relating to the charging of services between ....
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....rder has wrongly held that the said inclusion was only clarificatory in nature and hence chargeable to service tax retrospectively. We note that the said amendment was brought about by TRU Circular No.334/3/2011 dated 28.02.2011 and relevant extract of the said Circular is reproduced above. It appears to us that learned Commissioner has not properly appreciated the intent of the legislation during the disputed period and has confirmed the demand based on the reasoning and understanding which is not inconsonance with the provision of the law during the disputed period. We also find that the Tribunal in the case of Reliance ADA Group Pvt. Ltd. (cited supra) by the appellant, the Division Bench of the Tribunal has held that cost sharing agreement between the group entities are not subject to service tax prior to 01.05.2011. 10.4. In view of our discussion above, we are of the opinion that even if it is assumed that under the Integrated Services Agreement, the foreign company is providing any operational or administrative assistance to the appellant, then the same shall be taxable only w.e.f. 01.05.2011 and not prior to that. It is settled principle in law that when the ....
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....reement which are encloses as Annexure-A and tagged with the Appeal paper book and the same were not considered by the learned Commissioner. 10.6. In view of our discussion above, we hold that travel expenses incurred by the employees of the appellant were not incurred in relation to Integrated Services Agreement. These services are never received in India and hence cannot be taxed in the hands of the appellant under Section 66A of the Finance Act, 1994. 10.7. Now coming to Part B of issue number two which relates to whether the expenses incurred under the category of "Others" would be liable to service tax or not? It is to be noted that the Department has proposed to tax such other expenses by holding that same have been incurred pursuant to Integrated Services Agreement entered into by the appellant and accordingly, by virtue of Section 5(1) of the Variation Rules, shall be includable in the value of such professional services received under the Integrated Services Agreement. On the other hand, the stand of the appellant from the very beginning when audit took place in 2004-05 was that these other expenses incurred in foreign exchange represent cost ....
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....ether the appellant is liable to pay service tax on employee cost cross charged to its overseas Group companies or not? Learned Commissioner in the impugned order has confirmed the demand on the ground that foreign currency receipt classified under the head "Income from Support Services" in the balance sheet of the company is towards professional services provided by the NCR India to other NCR group entities under the Integrated Services Agreement. Whereas on the other hand, the stand of the appellant is that appellant has cross charged its overseas Group Company towards its employee cost, for which payment is received in foreign exchange. As per the appellant, the activities undertaken by the appellant for the group entities located outside India are mainly by way of advice, consultancy or technical assistance in relation to financial management, HRD, marketing management, production management etc. Further, the appellant submitted that assuming but not admitting that the transaction clarifies as provision of service, then the company shall be eligible to claim exemption from payment of service tax as per the provisions of Export of Service Rules 2005. After examining the stand ta....
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....re after the appellant cannot be charged with suppression or wilful misstatement and confirming the demand by invoking the extended period. While perusal of the material on record, we find that various audits of the records of the appellant were conducted by the Department from time to time wherein all the three issues involved in the present case were raised and the appellant submitted the explanation of each of the audit objection and there after nothing was done to issue the show-cause notice. Further we find that the appellant has also produced the reply to the audit objection for the period April 2004 to December 2005 vide Exhibit 1 dated 05/04/2006 whereby the appellant has informed the Department that foreign remittances are not paid for any services rendered to NCR India and is purely an expenses sharing process as required by the US law and also mandated by transfer pricing rules which have become applicable in India under Indian Income Tax law and the copy of the Integrated Service Agreement was also provided during the audit in the month of April 2006 itself whereas the learned Commissioner in the order has noted that the copy of the agreement was provided in....
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....al to show that extended period of limitation under Section 73(1) of the Finance Act can be invoked. We also find that the appellant has submitted return for the half year October 2006 to March 2007 on 18/04/2007 and the show-cause notice was issued on 24/04/2012 which is beyond even the extended period of 5 years and hence not sustainable in law. We also find that in the case of Continental Foundation Jt. Venture Vs. CCE, Chandigarh-I [2007(216) ELT 177 (SC)], the Hon'ble Apex Court has held in para 10 as under:- 10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or "collusion" and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to p....