AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (6) TMI 1042
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.... 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 the Act. In addition, he also imposed penalty of Rs. 10,000/- in terms of the provisions of Sec....
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....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 of Central Excise, Mumbai issued trade notice No. 20/2013 -14 S.T. -1 dated 10.02.2014 clarifying that, in cases where the foreign Banks are recove....
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....py 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 - 2020 (4) TMI 346 -CESTAT, New Delhi * 3i Infotech Ltd. - 2017 (51) STR 305 3.6 Without prejudice he also submits that demand on the provisions made in the books of account is liable to be set aside. Ld. Commissioner failed to appreciate tha....
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....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 that in any event, the Appellant had an agreement with Saygili P.D.C. Ltd., Cyprus, for providing the technical/machine operators etc. at site for operating machinery of CRC Evans. The service provided by Saygili cannot be covered by supply of tangible goods as they did not provide any goods ....
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....ort 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 handling charges and freight forwarding charges both India and abroad and the services rendered by the World Wide Logistics is taxable under Cargo Handling under Section 65(105)(zr) of the Finance Act. The Ld. Commissioner has further held that cargo handling Service fall in Rule 3 (ii) of the Import of ....
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....vision 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 that the foreign site offices had availed the service for the purpose of clearance of the exported goods at the foreign country port and transportation to the site of customer. The activity have been performed wholly outside India and is part and parcel of the balance sheet maintained by the foreign site office, which is to be consider....
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....s 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 charges. These charges are in the nature of charges towards providing Banking and Financial Services and service tax is sought to be recovered on such charges paid by the Appellant. Appellant has availed the services from the foreign entities and the local banks merely acted on the instructions of Appellant. Appellant have not disputed the facts t....
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....achineries 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 way of duty drawback at the time of re-export of such goods. Accordingly, the argument that both customs duty and service tax cannot be levied fails to impress. 4.4 As regard the demand of Service tax under Technical Testing and Analysis Services he submits that emails indicate that consultants from companies viz. EdD and PB Power visited Bangal....
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.... 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 * 2015 (40) STR 993 (Tri- Mum) -Axis Bank Ltd. Vs CST Mumbai -I * 2010 (256) ELT 369 (Guj) -CCE, Surat -I Vs Neminath Fabrics Pvt. Ltd. * 2013 (290) ELT 322 (Guj) SalsarDyg&Ptg Mills Pvt. Ltd. Vs. CCE, Surat -I * 2015(38)STR 884 (Tri. Mum) -Star India Pvt. Ltd. Vs. CCE Thane-I 4.9 He also submits that the Appellant has misplaced themselves in making a plea that officers of DGCEI neither have the 'Jurisdiction' nor are they 'Proper Off....
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....ly. 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 present matter. * Dileep Industries Pvt. Ltd. 2017(10)TMI 1231 * Themis Exports Pvt. Ltd. 2019(26) GSTL 104 * Greenply Industries Ltd. 2015(38) STR 605 * Final order No. A/85816/2018 dated 23.03.2018 - Raymond Ltd. In view of this, the appellant cannot be treated as service recipient and no service tax can be charged from them under Section 66A of the Finance Act. Business Auxiliary Service. 5.3 The demand for Service Tax under the category of "Business AuxiliaryServices" has been made on t....
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.... 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 in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1. - A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted.'' Above Section 66A(2) and its Explanation -I make it clear and t....
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.... 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 IATA agents in India are liable to service tax under reverse charge as services received in India. Para 31.2 (5) and (6) of this case law is the view recorded by Member (Technical), which became majority view and is reproduced below :- ''31.2 ....... (5) When the service has been received by the Head Office of the appellant at UK against its agreements with CRS/GDS Companies and as accepted in the impugned order, entire payment has been made abroad by the Head Office directly to CRS/GDS Companies and when in view of the provisions of Section 66A (2), the appellan....
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....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 Service, we find that Ld. Commissioner hasnot disputed the facts that the payment to overseas consultant/professional was made from the overseas projects site branch/ office of the Appellant on the basis of invoices issued by the said service providers to site office /branch office. Therefore, as already discussed the issue in above paras, the said services have been provided by the foreign consultants /professionals to the foreign site office/branch office of Appellant and thus, the service cannot be said to be received in India by the Appellant when the same is provided outside India to ....
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....nable 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 machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances". 5.9 The Appellant claims that transfer of possession and effective control of the machinery was with them, consequently the said transactions do not fall under the above service provision and they are not liable for payment of Service tax. The Adjudicating Authority, however, did not accept the contention of the appellant and observed that the agreement entered with overseas party, the value of hiring charges and other charges are separately specified and in ca....
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....ngineering 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 /branch office of Appellant from HIDELECO, confirmed by the Ld. Commissioner on the ground that the overseas offices were an integral part of Appellant and were nothing but an extended arm of the Indian entity. As per the invoices submitted by the Appellant, we find that the overseas site office of Appellant has received the service from HIDELECO for carrying out the survey and provided technical consultancy services for the transmission line project at Algeria Sonelgaz. Since the service of survey and technical consultancy is in relation to erection, commissioning and installation of transmission line, prima facie demand ....
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....red 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-mails indicate that they were actually reimbursable expenses. It is his further submission that the Hon'ble High Court of Delhi in the case of Intercontinental Consultants &Technocrafts Pvt. Ltd. reported in 2013 (29) S.T.R. 9 (Del.), has struck down the provisions of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, which mandated for inclusion of reimbursable expenses, also for paying the service tax liability. 5. The learned departmental representative reiterates the findings of the lower authorities. 6. In our considered view, the Revenue has no case on merits for more than one reason. Firstly, on peru....
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....ommodation 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 commerce at overseas country. However Ld. Adjudicating authority rejected the contentions of the Appellant on the ground that the overseas office were an integral part of the Appellant and were nothing but an extended arm of the Indian entity. In this context, we already in above paras and in the light of the judgment of M/s. British Airways v. CCE (supra), held that a person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country and such establishment situated abroad as a 'separate person'. Therefore, demand of service tax confirmed by the Ld. Commissioner on above ground ....
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....eaching 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 show that the Goods are for export In view of above, there is no merit in the impugned order on the issue with regard to the demand of service tax on Cargo Handling Service. Consequently, the demand on this service is set aside. General Insurance Service 5.18 On the said issue the case of the department is that Appellant have shown expenditures in foreign currency under the head "Insurance Charges" and appellant accepts order from the overseas customers with the conditions to Door delivery price, in such contract appellant pays insurance charges. General Insurance Service as defined under Section 65(105)(zl) of the Finance Act, 1994 is covered under Rule 3(ii....