TaxTMI 
TaxTMI 
2022 (8) TMI 1200
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....pay the same forthwith. 31.2. I also order recovery of interest, at the appropriate rate(s) as applicable during the relevant period, on the demand of Service tax as confirmed at para 31.1 above, under the provisions of Section 75 ibid. 31.3. I impose a penalty of Rs.15,000/- only (Rs.5,000/- each for each S.T.-3 return), for their failure to file correct service tax returns, during the period from October, 2006 to March, 2008, as provided under Section 70 ibid, under the provisions of Section 77 ibid 31.4. I also impose a penalty of Rs.1,48,90,190/- (Rupees One Crore Forty Eight Lakhs Ninety Thousand One Hundred and Ninety Only], on the assessee, i.e. M/s Tata Technologies Ltd., Pune, under the provisions of Section 78 ibid. However, since penalty is being imposed on M/s TTL under Section 78 ibid, I do not propose to impose any penalty under Section 76 ibid, in view of the provisions of fifth proviso to Section 78 ibid, as discussed in para 30 above; 32. I also give an option to the assessee, i.e. M/s Tata Technologies Ltd., Pune, under first proviso to Section 78 of the Finance Act, 1994, to pay the reduced 25% of the penalty amount as imposed ....
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.... order No A/713/13/CSTB/C-I dated 15.3.2013 remanded the matter back to adjudicating authority. While remanding the matter CESTAT made following observations:- "5.1 As per the agreement entered into between TTL & TTL Korea and TDCVL, TTL and TTL Korea have to render Information Technology Services to TDCVL in Korea. The services rendered consist of two components - onsite services rendered by TTL Korea and offshore services rendered by TTL. Nevertheless, the service recipient remained TDCVL and not anybody else, for which they have paid the consideration. As per the agreement, the invoices for the services rendered are raised by TTL Korea on TDCVL for both onsite as well as offshore services. It is also confirmed by the Counsel that VAT/GST liability has been discharged by TTL Korea at the time of supply of services to TDCVL. If that be so, the question of subjecting the same transaction to Service Tax in India at the hands of TTL would not arise at all. 5.2 Secondly, the C.B.E. & C. in the case of M/s. Tech Mahindra relating to IT Software services had clarified that onsite services rendered abroad would not be treated as service provided from India. In oth....
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....services provided by TTL Korea in the nature of Information Technology Software Service (ITSS) and hence not liable to service tax prior to 16.05.2008. • The services rendered by TTL Korea are not classifiable as Business Auxiliary Service (BAS) on behalf of appellant, in the absence of principal-agent relationship and hence not taxable under Business Auxiliary Service (BAS). • Service tax cannot be levied on the transaction between overseas branch and head office in India which is engaged in exporting the services outside India as this is against the objective of the legislation to introduce section 66 A in the finance act, 1994. In any case. The services were neither received in India not used for any business or commerce in India and hence, not liable to be taxed in India. As per following decisions: • KPIT Cummins Infosystems Ltd. [2014 (33) STR 105 (T-MUM)]; • 3i Infotech Ltd. [2017 (51) S.T.R. 305 (Tri. - Mumbai)]; • Milind Kulkarni [2016 (44) S.T.R. 71 (Tri. - Mumbai)] • ITSS services were expressly excluded from the ambit of "Business Auxiliary Services" and "Consulting Engineer Services" during t....
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.... to TDCV. These services and the amount paid has been enumerated separately in the contract between Appellant and TDCV. • It has been held in a catena of judgments that the nature of payment arrangement does not change the substantive nature of service which has to be derived from the contract. • The nature of such service has been held to be BAS and not Information Technology Software Service in a catena of judgments and also by the Bombay High Court in the case of CITI BANK N.A. [2018 (18) G.S.L.L. 580 (Bom.)). • Several cases have held that when such services were provided by the India subsidiaries to their foreign holding companies, the nature of the service was BAS and also the service was said to be provided by the India subsidiaries to their foreign holding companies. Subsequently, in these cases the benefit of export was extended to these companies. • Here, it was held that it is location of the recipient of the service which is pertinent. Here, it is an admitted fact that the location of the service receiver, appellant is in India .Hence, as per Section 66A(2) of Finance Act, 1994, appellant is required to deposit tax on ....
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....e Company Ltd., Korea (hereinafter referred to as "TDCV Korea") on behalf of the assessee, i.e. M/S TTL. The said overseas branch had an independent legal status in South Korea and all the remittances for the assignments entered into by M/S TTL and TDCV Korea, were received directly by the branch. The Overseas branch in South Korea has since reportedly stopped their activities after 31.03.2008. 14. The investigations conducted in the matter revealed that TTL Korea, who was providing services on behalf of the assessee, being separate legal entity as per the provisions of Section 66A of the Finance Act, 1994, were providing Business Auxiliary Service', as defined under Section 65(19) of the Act and therefore, Service Tax on such services was liable to be paid by M/s TTL on the amount recovered by TTL Korea, from their client, under the reverse charge mechanism, in terms of Section 66A of the Act. 15. Accordingly, a Show Cause Notice dated 24-04-2012 was issued to the assessee, demanding Service Tax of Rs.1,48,90,191/-, for the period October, 2006 to March, 2008, which has been calculated, considering the payments received by TTL Korea, from TDCV Korea, along wi....
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....arm of M/s TTL, but a separate entity as per the provisions of Section 66A, are thus to be treated as a separate person for the purpose of the said Section and hence, it is clear that as per the provisions of Section 65(19) of the Finance Act, 1994, TTL Korea, were providing Business Auxiliary Service' to M/s TTL. 19.2 Further, as per the provisions of Section 66A(1) of the Finance Act, 1994, 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 all the provisions of this Chapter shall apply: Provided that where the recipient....
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....ved in this. case does not relate to the taxability of category of the services provided by TTL Korea, to TDCV Korea. In the subject case, TTL Korea, was providing SAP implementation services to TDCV Korea, on behalf of M/s TTL, and hence as per the provisions of Section 65(19) of the Act (as reproduced in para 17.1 above), TTL Korea, were providing Business Auxiliary Service to M/s TTL, I therefore do not accept the contention of the assessee that the services provided by them fall under the category of ITSS, and hence the same is liable to be rejected. (iii) Whether Head office of M/s TTL in India can be regarded as a 'Permanent Establishment in India': 21.1. M/s TTL in their written submissions dated 02-07-2012 have contended that the head office of M/s TTL in India cannot be regarded as "Permanent Establishment in India". During the course of Personal Hearing held on 19.10.2012, the authorized representatives of M/s TTL, have submitted a copy of relevant pages of Model Tax Convention on Income and Capital'. The term "Permanent Establishment" has been defined at Chapter II , Article 5 of the said Model Tax Convention on Income and Capital', whic....
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.... by M/S TTL, in fact, do not support their case, since as per the said submissions, as explained above, the Head Office of M/s TTL is very well covered under the definition of "Permanent Establishment" and correctly regarded as "Permanent Establishment in India". Therefore, the assessee's submission/ contentions that Head office of M/s TTL in India cannot be regarded as a 'Permanent establishment in India' is totally untenable and liable to be rejected. (iv) Whether the demand is liable to be restricted to the onsite services Provided by the overseas branch: 22.1. It has been contended by M/s TTL that TTL Korea, has performed only the on-site portion of the services and the offshore portion of the services were performed by TTL India, and hence there can at least be no demand on that portion of the activity that was performed by TTL India. 22.2. Here I find that in their written submissions dated 02-07-2012, at Para A.4., M/s TTL, have submitted as under : "----------The agreement between the parties specifically referred to the branch office in Korea. This shows that the obligation of rendering the service to TDCV Korea, was on TTL (....
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....tware consulting and professional services in support of implementation & maintenance of the Software which the client desires to obtain. AND WHEREAS the AND WHEREAS the company desires to provide implementation services to the client for the implementation of the relevant components of SAP 4.6C in SAP R/3 4.6C as per implementation proposal referred to above. AND WHEREAS, the company takes single point responsibility for successful implementation of SAP in TDCV. Under a separate and distinct agreement entered between TDCV and Daewoo Information Systems (DIS), TDCV have arranged with DIS to actively participate and sup[port with skilled consultants to ensure effective interface from the point of view of both language (fluency in English and Korean) and local business requirements. 1. DEFINITIONS a) In this agreement (including the Annexures attached hereto) the following words will have the meaning assigned to them as under: ....... "Contract Price" shall mean the fees payable on time and material basis as specified section 6 of this agreement, to be paid by TDCV to TTL for performance of the Work under this Contract. ....
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....nto agreement with the appellants for provision of offsite services. Appellants executed the offsite portion, as was sub contracted to them. For the services rendered by them to TTL Korea, Appellant raised the invoice and also raised debit note on TTL Korea for reimbursable expenses incurred by them for providing these services. TTL Korea for the services provided to TDCV Korea raised the invoices for both off-shore and onsite services. TTL, Korea discharged liability under Korean VAT on both the offshore as well as on-site services. There is not even whisper of any invoice being issued by TTL Korea on the appellant for any services provided by the Appellant to them. 4.6 Even if it is held that the contractual agreement for the provision of service was between appellant and TDCV Korea, then also the service is provided by the appellant to their client in Korea and no service is provided to any one in India. The appellants have for the provision of the said service has not raised any invoice on their branch office located in Korea. Nor the branch office has raised any invoice on the appellant in respect of any services provided by them to TDCV as per the agreement referred above.....
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....stablishment of the appellant situated abroad, the service has been provided by foreign service providers abroad and the service has also been consumed abroad. 5.4 In this view of the matter, it appears that the adjudicating authority has not considered any of the issues germane to the matter. Further, this Tribunal in the case of Intas Pharmaceuticals Ltd. (supra) held that when service is provided outside India, liability to pay Service Tax under reverse charge mechanism under Section 66A would not arise. Similarly, in the case of IDS Systems Pvt. Ltd. also this Tribunal held that, as regards reimbursement of expenditure relating to employees deputed to USA, the activities have taken place in USA and therefore, liability to Service Tax would not arise. In the case of Aztescsoft Ltd. also, this Tribunal held that, if the activities have been undertaken in a foreign territory, the question of levying Service Tax in India would not arise." 4.6 In case of Torrent Pharmaceuticals Ltd. [2015 (39) STR 97 (T-AHM)] following was held: "5.3 On the issue of demand of service tax of Rs. 11,56,32,589/- with respect to remittances made by the appellant to branch offices, b....
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....is 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 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 ....
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....e 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 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 agains....
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....y in the capacity of 'facilitators' and the services so procured were consumed in India or the services so availed were consumed outside India. Learned Senior Counsel appearing on behalf of the appellant relied upon guidelines of 2006 & 2008, issued by Organisation for Economic Co-operation and Development (OECD) Centre for Tax Policy & Administration, Paris; on ''Emerging concepts for Defining Place of Taxation on VAT/GST to cross Border Trade in Services and Intangibles''. Para 8 to 13 of this paper of January 2008, reproduced below, give a glimpse of international thinking on the place of taxation of services and its underlying concepts :- ''2. Underlying concepts 8. VAT/GST is generally charged at all stages of the economic process, but with the provision of a mechanism enabling firms to offset the tax they pay on their own purchases of goods and services (input tax) against the tax they charge on their sales of goods and services (output tax). Accordingly, most businesses can recover all, or most, of the input tax they pay as an offset against the output tax they charge. However, customers who are not identified for VAT/GST, or are not required to be....
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....ssment or tax shift mechanism (hereinafter reverse charge mechanism), as far as this type of mechanism is consistent with the overall design of the national consumption tax system. Once the place of taxation is determined, the country that has the right to tax the supply decides whether any tax is actually due. For example, countries may wish to consider dispensing with the requirement to reverse charge the tax in circumstances where the customer would be entitled to fully recover it through deduction or input tax credit. However, the examples that follow assume use of this mechanism as the means of accounting for the tax. There may well be issues connected to reverse charge that will need addressing at a later stage, but for the moment the working assumption is that this mechanism is appropriate. 13. In these circumstances the reverse charge mechanism has a number of key advantages. Firstly, the tax authority in the country of consumption can verify and enforce compliance since that authority has jurisdiction over the customer. Secondly, the compliance burden is shifted from the supplier to the customer and is minimised since the customer has full access to the details of....
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....n if taxable service has been rendered by branch to headquarters and vice versa. The impugned order has overlooked the requirements of accounting standards which mandates that financials of the branch are to be included in the financials of the corporate entity that has established the branch. Such inclusions owing to accounting standards do not suffice to conclude that services were rendered by foreign service providers to the Indian headquarters. No effort has been undertaken by adjudicating Commissioner to ascertain the nature of the transactions for which payments were made by branch in Dubai and the demand in the impugned order lacks appropriate robustness in consequence. 11. Even if the payments are attributable to service rendered by foreign service providers to the appellant, the scope of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 needs ascertainment. We refer to our decision in re M/s. Tech Mahindra Ltd. wherein we have held that '21. From the above, it is apparent that mere identification of a service and the legal fiction of separate establishment is not sufficient to tax the activities of the branch. The very e....