TaxTMI 
TaxTMI 
TaxTMI 
2022 (1) TMI 316
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.... India, as a consideration towards the service that is rendered by the branches to them; such payments made are consideration towards the services provided by the branches to the appellants that is Cades Digital Pvt. Ltd. A SCN dated 04.05.2011, covering the period 2006-2010, has been issued and was confirmed by Order-in-Original No.57/2012 dated 23.04.2012. Hence, the present appeal. 2. Learned Counsel for the appellant submits that the expenses incurred by them are towards salaries and other expenses as can be seen from their books of accounts. He produced a copy of application made to concerned authorities to open offices/branches overseas wherein it can be seen that the recurring expenses per month are considered under the Head of salaries of staff, rent and maintenance, telephone expenses, travelling expenses and other incidental expenses. He also submits that the branches are registered in respective countries in the name of the appellant only and they are rendering services on behalf of the appellant to their ultimate customers and not to the appellant head office of such branches. It cannot be held that the branches are rendering any service to the head office. Learned Cou....
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....long with interest payable. He also submits that demand on account of sales commission professional charges and incidental expenses etc. comes to Rs. 7,81,428/- and whereas the appellant claimed that they have to pay only Rs. 6,48,290/-. 5. Heard both sides and perused the records of the case. 6. Having gone through the rival contentions, we find that the issue is no longer res integra going by the judgments cited by the learned Counsel and the ratio thereof, we find that the amounts incurred by the head office towards the salaries etc. of the employees working in their branches can by no stretch of imagination be equated to any service rendered to them by the respective branches. We find that in the case of Kusum Healthcare Pvt. Ltd. (supra), it was held that the legal fiction created in proviso to Section 66A for consideration of branch as a separate establishment is certainly not for the purposes of demanding service tax on the services alleged to have been rendered by the branch to the head office. In fact, going through the records of the case, we find that the payments made by the appellants are none other than the recurring expenses like salary, travelling allowance, rent,....
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....e providers to the appellant then in such cases service tax on reverse charge basis is required to be paid, which is being paid by the appellant even if the payment of such services availed and consumed in India were routed either through appellant's branch office or distributors. 5.4 Before giving our observations, it is relevant to glance through the provisions of Section 66A(1) of the Finance Act, 1994 reproduced below :- ''66A. Charge of service tax on services received from outside India. - (1) Where any service specified in clause (105) of section 65 is, (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly ....
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....vision of service whether in India or out of India. Theoretically it could be possible that a person carrying business through a permanent establishment abroad may like to pay lower rate of local VAT/GST abroad to avoid service tax payment in India by showing the services to have been availed abroad. However, there is no likelihood of such avoidance in case of an assessee who is eligible to Cenvat credit in India for the service tax payable in India for which the assessee is entitled to Cenvat credit. It is also not the case of the of the Revenue that appellant is not capable of utilising Cenvat credit admissible as they have paid more than Rs. 12,000 crores as taxes during the periods 2007-2008 to 2011- 2012. 7. The matter came up before the Tribunal again in the case of Milind Kulkarni - 2016 (44) STR 71 (Tri.- Mum.). The Tribunal after examining the earlier decision observed as below:- "19. The appellant-assessee has established branches for furthering its commercial objectives. The benefit of assigned activities of the branch will, undoubtedly, accrue to the appellant. There is no dispute that it is the appellant-assessee who enters into contractual agreements with overseas....
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....gal fiction may have to be ascertained. In doing so, the goals of the appellant as an exporter cannot be far from our mind. 25. Section 66A requires taxing of taxable services rendered by an overseas branch to its head office and the two sets of Rules limit tax demand only to the extent that these services are received in India in relation to business or commerce. A plain reading would make it apparent that the services referred to must be for pursuit of business or commerce in India. The two sets of Rules provide for availment of Cenvat credit of the tax paid by the Indian entity on 'reverse charge basis.' As an exporter, the Indian entity is entitled to claim refund of taxes lying unutilized in Cenvat credit account. There is no dispute that the activities of the branch are in connection with the export activity of the appellant-assessee. That the legislature would prescribe the collection of a tax merely for the purpose of refunding it subsequently does not pass the test of reason. More so, as there is no inference of any monitorial aspect in undertaking such an exercise. An exporter who operates through branches is clearly not the target of the legal fiction of branches being....