TaxTMI 
TaxTMI 
2022 (6) TMI 1042
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....ound that Appellant have not paid /short paid service tax amounting to Rs. 10,01,69,147/- under different services. Resultantly, the appellants were issued notice dated 17.04.2013 demanding service tax on the following services received during the period July 2007 to March 2012 from the abroad. Following are the services for which demands are raised. Sr. No. Service Category Demand amount 1. Banking and Other Financial Services Rs. 3,69,11,891/- 2. Business Auxiliary Service Rs. 3,61,80,696/- 3. Legal Consultancy Service Rs. 9,06,692/- 4. Supply of Tangible Goods Service Rs. 1,33,62,965/- 5. Technical Testing and Analysis Service Rs. 16,51,412/ - 6. Cargo Handling Service Rs. 95,92,040/- 7. General Insurance Service Rs. 12,92,403/- 8. Information Technology Software Service Rs. 2,71,047/- The Adjudicating Authority vide impugned order confirmed the above demand of Service Tax amounting to Rs. 10,01,69,146/- along with interest and imposed penalty at the rate of Rs. 200/- per day or 2% per month, whichever is higher under Section 76 and also imposed a penalty equal to tax demanded under Section 78 of....
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....antees to the overseas customers of the Appellant both prior to and post the award of contracts. Appellant is required to give bank guarantees to its overseas customers in regard to the contract of supply and /or erection and commissioning of high-tension transmission towers to be executed outside India. None of the bank guarantees provided by the foreign banks were in relation to the business and commerce of the Appellant in India. The Appellant approached its bankers in India to provide the bank guarantees of overseas bank to Appellant's overseas buyers. The Banks in India approached foreign bank to provide the guarantee and enter into contract with foreign bank to issue guarantee to overseas buyers of the Appellant. The Appellant does not enter into any contract with the foreign bank and there is no privity of contract between the foreign bank and the Appellant. The Appellant availed the services of Indian Bank. The foreign bank does not provide any services to the Appellant. Ld. Commissioner committed an error of law in holding that the foreign bank charged bank guarantee commission from the Appellant. There is nothing on record to reach these findings. The Chief Commissioner o....
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....ay service tax on commission or fees paid by the site officers of the appellant in foreign countries. Since the foreign site officers are paying all the applicable taxes/ duties, applicable in the foreign country. He submits the sample copy of invoices raised by the commission agent on the foreign site offices for providing services in respective foreign countries. 3.5 He also submits that Ld. Commissioner has confirmed the demand claiming that the overseas office of the Appellant is a temporary arrangement made for the convenience of the Appellant and the overseas branch worked under the umbrella of the office of the Appellant in Gandhi Nagar and that the income and expenditure of the overseas office are finally incorporated in the balance sheet of the Appellant. In any event and without prejudice, the Appellant's office in India its overseas site office are distinct entities under Section 66A (2) and any service availed by the overseas branch/ office in relation to business outside India cannot be said to have been received by the Appellant in India and subjected to service tax in India. He placed reliance on following decisions:- • Steel Authority of India ....
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.... are not for providing legal and consultancy services. The Ld. Commissioner has completely overlooked the aforesaid facts and wrongly confirmed the demand under legal consultancy service. It is settled position in law that prior to 01.07.2012, the service tax was payable under the defined taxable services from the date notified by the Government of India. 3.9 As regard the demand of Service tax of Rs. 1,33,62,965/- under the supply of Tangible Goods Services he submits that appellant had imported pipe layer machine /caterpillar pipe layer machine on lease/rent from outside India for execution of laying of long distance pipe line work in India. The said transaction were import of goods and not import of services. The Appellant on import of machinery paid the appropriate customs duty Further, the machinery imported by the Appellant on lease/rent no service tax was payable as the effective control and possession of the machinery was with the Appellant. The Appellant was required to pay to any damage to the machine was sufficient to show that the effective control and possession of the imported machine was with the Appellant. 3.10 Without prejudice, he further submits....
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....uring the testing. Travel expenses paid for visiting Bangalore and China to witness the testing of the tower parts are not covered by taxable services of technical testing and analysis services. Alleged testing by the representatives of the buyers at China are covered by Rule 3(3)(ii) of the Import of Service Rules and the alleged services are provided outside India and no part of services are provided in India and no service tax is payable on the alleged services in China. 3.12 He further submits that Journal Voucher dated 31.01.2009 showing the description of testing expenses cannot by itself mean that the consideration was paid for rendering technical testing and analysis services. The contract does not provide for any technical testing and analysis services to be provided by the overseas buyers. The contract with the buyers clearly provides for payment of travel expenses to witness the testing of the tower parts. 3.13 As regard the demand of Rs. 95,92,040 under taxable service of cargo handling services he submits that Ld. Commissioner held that Appellant had availed services of M/s World Wide Logistics Partners Inc USA, for providing custom clearing and handl....
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...., USA, had engaged their Indian Partner M/s Pisces Container Line Pvt. Ltd. , Thus M/s Pisces has provided clearing and forwarding services for clearing of material from the factory premises of the Appellant to the Indian port. Thus to that extent clearing and forwarding services were performed in India and received in India. For provision of said service M/s Pisces has charged service tax from the Appellant and raised invoices on the head office of the Appellant directly. The foreign site office in Congo has availed the service of M/s Gectrans for the clearance from port in Congo and transportation of the goods from port to the site of customer. The payment has been made directly by the foreign site office to the Foreign Service provider. Further, the activity has been performed wholly in Congo i.e. outside Indian and is part and parcel of the balance sheet maintained by the foreign site office at Congo, which is to be considered as business income and expenditure of Congo, for the purpose of Income tax and accordingly the same is for the purpose of business and commerce carried out in congo. No service tax is payable on said amount by the Appellant. 3.14 He also submits ....
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....gn site offices cannot be taxed under the category of 'Information Technology Software Service'. 3.18 He also submits that extended period of limitation is not invokable in the present case as there was no suppression of facts with an intent to evade payment of service tax. The Department had carried out audits regularly of the records maintained by the Appellant during the disputed period. Appellant also filed Service tax return regularly. Hence extended period cannot be invoked. He placed reliance on the various decisions. 3.19 Without prejudice he also submits that the Central Excise officer empowered to issue show cause notice under Section 73 of the Finance Act 1994 is only the Jurisdictional officer of the Appellant. The DGCEI officers are not the Central Excise Officers empowered to issue show cause notice. Thus the present show cause notice is without Jurisdiction. He placed reliance on the decision of Canon India (P) Ltd. Vs. Commissioner of Customs 2021-VIL- 34-SC. 4. Shri T.G Rathod, Learned Additional Commissioner (AR) appearing for the Revenue relies on the impugned order and he submits that the foreign banks charged fees in the name of bank ....
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....her charges separately. But in case of agreement entered with the other two companies the value of hiring charges included all expenses. Further, if the machineries were fully under the control of Appellant, hire charges would have been uniform for the period of hiring. But, the hiring charges varied from month to month depending upon the usage of the machineries in that period. These factors disprove Appellant's claim of having effective control of the equipment during the period of hire. The overseas offices were an integral part of the Appellant and were nothing but an extended arm of the Indian entity. Thus, the argument put forth by the appellant that services of HIDELECO was related to the immovable property and used outside India, therefore the service tax was not payable is not sustainable. In the instant case the goods were obtained on hire basis, however for their entry into India the customs formalities call for payment of appropriate duty since no exemption has been provided for such situation. However, such situation has been encompassed under Section 74 of the Customs Act, wherein the Customs Duty paid at the time of importation of such goods is off-set by....
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....aintenance of software, software licence fees, software purchase, internet charges etc. are covered under the definition of "Information Technology Services' as defined under clause 65(105)(zzzze) of the Finance Act, 1994. The argument of Appellant that said expenses related to the foreign site offices and they are not liable to pay service tax on said expenses is not sustainable, since the overseas offices were an integral part of the Appellant. 4.8 He placed reliance on the following decisions in support of his arguments. • 2016(41) STR 689 (Tri. Mum) -Tata Steel Ltd. Vs. CST, Mumbai -I • 2018(8) GSTL 386 (Tri. Del) - Air India Ltd. Vs CST, Delhi • 2015(39) STR 97 (Tri. Ahmd)- Torrent Pharmaceuticals Ltd. Vs CST, Ahmd. • 2019 (29) GSTL 304 (Tri. Mum)- Board of Control for Cricket In India Vs CST, Mumbai -II • 2005(183) ELT 241(SC) - Dharampal Satyapal Vs CCE, New Delhi • 2011(265) ELT 81 (Tri. Del)- CCE, Chandigarh Vs Dharampal Prem Chand Ltd. • 2019(20)GSTL 198 (Bom) -McKinsey & Company INC Vs CCE. • 2016 (46) STR 297 (Tri. Del) Lakhan Singh & Co. Vs. CCE Jaipur ....
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....igh-tension power transmission towers abroad. For this the foreign banks charged bank guarantee commission. Also while remitting foreign currency earning in India, the foreign bank charged bank charges. These charges are in the nature of charges towards providing Banking and Financial Service and Service tax is sought to be paid on such charges paid by the Appellant. We find that no documents have been produced by the department showing that foreign bank has charged any amount from the appellant directly. Therefore, to presume that they are receiving services from the foreign bank is not correct. The facts as narrated in the impugned order clearly indicate that it is the Indian Banks who had paid the charges to the foreign banks. We find that the Appellant solely deal with the Indian Bank and appellant do not have any kind of interaction with foreign banks. Clearly, in this matter service if any has been received it is by the Indian Bank and not by the appellant. Hence, amount charged by foreign banks to Indian banksprima facie cannot be considered as service received by the appellant.The following judgments relied upon by the appellant squarely applicable to the facts of the prese....
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....ress 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 all the provisions of this Chapter shall apply : Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment....
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....at the site office abroad work under the umbrella of the head office located in Gandhinagar. At this stage it will be relevant to examine the judgment of M/s. British Airways v. CCE (Adj.), Delhi 2014 (36) S.T.R. 598 (Tribunal) (supra). The facts of this case were that M/s. British Airways PLC (BA, UK); with its registered office at Harmondsworth, UK; were an Airline engaged in providing the service of transportation of passengers and Cargo by air throughout the world. BA (UK) also had a branch office in India (BA, India). BA (UK) entered into agreement with several CRS/GDS companies for maintaining database regarding flight schedules of BA (UK) Flights, fares, seats availability etc. and this information was made available to IATA agents of British Airways all over the world including BA (India). All the CRS/GDS companies were located outside India and had no branch office in India. CRS/GDS companies also provided certain hardware to IATA agents for providing connectivity for retrieving data and bookings etc. Entire payment to CRS/GDS was made by BA (UK) based on the number of tickets issued by IATA agents. It was the view of the Revenue in that case that services availed by ....
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....justment or by other indirect means, for any services provided by the CRS/GDS Companies.'' From the above interpretation made in the case of M/s. British Airways v. CCE (Adj.), Delhi (supra) it has to be seen in the present proceedings whether while procuring services branch offices /site offices of the appellant abroad have acted only in the capacity of 'facilitators' and the services so procured were consumed in India or the services so availed were consumed outside India. In the light of the judgment of M/s. British Airways v. CCE (supra), the foreign branches/establishments of the appellant have not acted as 'facilitators' but have actually consumed those services abroad for which local VAT/GST/ Service tax of the respective country has been paid. Therefore, payment of local tax abroad will be an indicator to decide whether a service is provided and consumed outside India or has been consumed/received in India. In view of the above discussions and analyses we find that the impugned order confirming the service tax liability on the appellant cannot be sustained Legal Consultancy Service 5.6 On the third issue regarding Service Tax liability on legal consultancy....
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.... for which their overseas office /branch office paid the amount to services providers. For example - fees for documents certification for submission to customers, local registration fees paid in Ukraine, Local municipal tax paid in Saudi Arabia, Fees for land for Brazil, paid to Saudi Chambers of Commerce for office maintenance and electricity charges, consultancy for CIS market for country Armenia etc. The said expenses cannot be concluded that the same was paid for the Legal Consultancy Service as defined in the Act. Hence the demand of service tax under wrong classification of service is not sustainable in law. Accordingly, we decide this issue also in favour of the Appellant. Supply of Tangible Goods Services 5.8 The next issue relates to demand of Service tax under the head of "Supply of Tangible Goods Services" in respect of machinery imported by the Appellant on lease /rent basis in India for their required purposes. The Section 65(105)(zzzzj) of the Finance Act, 1994 defines "supply of tangible goods services" as follows :- "any services provided or to be provided to any person by any other person in relation to supply of tangible goods including machine....
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....y interference or hurdle from the appellants. Ongoing through the clauses of agreement, as produced before us, we find that the appellants had handed over the capital goods' possession to the lessee as also the right to use. These two important factors that determine the requirement as to whether the service is a taxable service or otherwise under supply of tangible goods for use services'. We find strong force in the contentions raised by the appellant that the case does not fall under supply of the tangible goods for use service. We also find that identical issue is settled by the Tribunal in the case of Praveen Engineering Works and Bhima SSK (supra). 8. In the facts and circumstances of this case and the authoritative judicial pronouncements on issue, we find that the impugned orders are unsustainable and liable to be set aside and we do so. 5.10 In view of the above facts and decisions we hold that the appellant's transactions are not covered under the entry "supply of tangible goods Service". Accordingly, we set aside the demand on this service. 5.11 We also observed that service tax demand is related to services received by the abroad site office /....
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....d that the CESTAT in the matter of Geno Pharmaceuticals Ltd. Vs. Commissioner of Central Excise, Goa, 2017 (47) S.T.R. 264 (Tri. -Mumbai) held that "2. Heard both sides and perused the records. 3. The appellant herein appointed an agent named Shri S. Gupta by an agreement dated 3-3-2006. The said agreement provided that the agent shall provide services of promoting and marketing of the product sold to M/s. Nebula Trading Co. in the interior parts of Myanmar and the expenses to be incurred for travelling tickets, telephone charges, postage, hotel accommodation, fooding, etc.; appellant reimbursed the expenses incurred by Shri S. Gupta on the actuals as per the bills raised by Shri S. Gupta. It is the case of the Revenue that the appellant is liable to pay service tax under the reversecharge mechanism under the category of 'business auxiliary services' as it is undisputed that Shri S. Gupta has rendered services of promoting and marketing of the appellant's goods. 4. The learned counsel brings to our notice the factual matrix of the case and takes us to the e-mails which have been sent by Shri S. Gupta to the appellant. It is his submission that these e-mai....
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....amount as is equal to the actual consideration charged for the services provided or to be provided." It can be seen from the above reproduced Rule 7, as this rule is specifically applicable for reverse mechanism under Section 66A and for the purpose of discharge of Service Tax for the service provided from outside India, the value is equal to the actual consideration charged for the services provided or to be provided. In the impugned matter it is on records that in case of fees/ remunerations paid to overseas technicians Appellant have paid the service tax. Since the alleged amount was not paid for services but paid for travelling expense, accommodation charges etc. clearly said expenses cannot be considered as value of taxable service. Hence, demand of service tax not sustainable on said expenses. Cargo Handling Service 5.15 As far as the demand of service tax under the head 'Cargo Handling Service' is concern, we find that the argument put forth by the Appellant before the Ld. Commissioner was that they had paid the cargo handling charges from their overseas site office. These payment are exclusively related to the services at overseas country for the business and....
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....been received for export purpose. Clearly, the handling of export cargo not taxable under the 'Cargo Handling Service'. After having gone through the aforesaid definition, it leaves no amount of doubt in our mind that such a service tax could not have been levied on the cargo handling services availed by the Appellants for export purpose. 5.17 We also find that the Board vide Circular No. 11/1/2002-TRU, dated 1- 8-2002 as regard the cargo handling service had also clarified as under:- 6. All goods meant for export are excluded from the scope of this levy. There may be cases where goods may be transhipped at a place other than the place of packing before reaching a place from where it is exported. For example goods are packed say at Agra for transportation to Bhopal where it is transhipped and ultimately reaches Mumbai, from where it is exported. A doubt has been raised as to whether service tax would be leviable on cargo handling service at Agra. It is clarified service provided in relation to any cargo which is meant for export, would not be taxable irrespective of the fact that it reaches the place of export after transhipment. However, the relevant documents should s....