TaxTMI 
TaxTMI 
2024 (12) TMI 281
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....f the Finance Act, 1994; (c) I impose penalty 50% of Rs. 70,88,44,126/- i.e. Rs.35,44,22,063/- (Rs. Thirty Five Crores Forty Four Lakhs Twenty Two Thousand and Sixty Three only) on the Party under Section 78 of the Finance Act. 1994 for mis-stating the facts before the department, suppressing the value of taxable services received by them before the department and contravening the provisions of the Finance Act, 1994 with intent to evade payment of Service tax. Provided further that if service tax and interest is paid within a period of thirty days of receipt of this order, I restrict the penalty to 25% of Rs. 70,88,44,126/- and the benefit of reduced penalty shall be available only if the amount of penalty so determined has also been paid within the period of thirty days of receipt of this order. Provided also that the benefit of the reduced penalty shall be available only if the amount of Service Tax, applicable interest and amount of such reduced penalty is also paid within such period i.e. within 30 days of receipt of this order." 2.1 Appellant is a Government of India undertaking interalia engaged in providing taxable services under the category of....
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.... 1 15010101 License Fees 1196888194 147935381 2 15010201 Documentation fees 195305689 24139783 3 15010301 Computer Software 0 0 4 19060002 License Fee-ALH 1193608 147530 5 19060101 Documentation 820754 101445 TOTAL 1394208245 172324139 Financial Year 2014-15 SI.No. ACCOUNT head of Trial Balance Description Amount in Rs. Service Tax payable 1 15010101 License Fees 1069410600 132179150 2 15010201 Documentation fees 269347513 33291353 3 15010301 Computer Software 2146214 265272 4 19060002 License Fee-ALH 0 0 5 19060101 Documentation 387377 47880 TOTAL 1341291704 165783655 GRAND TOTAL (2011-12 TO 2014-15) 6034249129 708844126 2.4 After completion of investigations, show cause notice dated 22.09.2016 was issued to the appellant asking them to show cause as to why- "(i) Service tax amounting to Rs. 70,88,44,126/- (Rs. Seventy Crores Eighty Eight Lakhs Forty Four Thousand One Hundred and Twenty Six only) inclusive of Education Cess & Secondary Edu....
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.... • Munjal Showa Ltd. 2017 (5) GSTL 145 (Tri.-Chan.); • Lurgi India International Services Pvt. Ltd. 2020 (34) GSTL 507 (Tri.-Hyd.); • Technova Imaging Systems Pvt. Ltd. 2019 (31) GSTL 472 (Tri.-Mumbai) • Hindustan Aeronautics Ltd. (Service Tax Appeal No.76328 of 2014). • As appellant is wholly owned Government of India entity, intention to evasion of tax cannot be read in the demand by invoking the extended period. Reliance is placed on the following rulings:- • Nepa Ltd. 2013 (298) ELT 225 (Tri.-Del.); • Hindustan Insecticides Ltd. 2017 (6) GSTL 218 Tri.-Del.); • Indian Oil Corporation Ltd. 2013 (291) ELT 449 (Tri.-Ahmd.). • For the same issue, in the case of appellant, the demand made by qualifying the services under the category of Consulting Engineering Services has been set aside vide Final Order No.70887-70888/2019 dated 24.04.2019. • Appeal be allowed. 3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities. 4.1 We have considered the impugned orders along with the submissions made in appeal and....
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....e expenses borne by the Party are as under:- • License Fees • Documentation Fees • Computer Software • License fee-ALH • Documentation These items of services are intricately related to the transfer of technology means transfer of intellectual property right as defined under:- Section 65 (550) defines the term 'Intellectual Property Right" as "any right to intangible property, namely, trade marks, designs, patents or any other similar intangible property, under any law for the time being in force, but does not include copyright" Now, as per Section 65(55b) 'Intellectual property service' means:- (a) transferring. [temporarily); or (b) permitting the use or enjoyment of. any intellectual property right:) The taxability or taxable service is defined by Section 65(105) "taxable service" means any [service provided or to be provided] (zzr) to any person, by the holder of intellectual property right, in relation to intellectual property service In view of the above definitions, I find that the amount paid for the above said items f....
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.... Now, as per Section 658(37) of Finance Act, 1994 "person" includes,- (i) an individual, (ii) a Hindu Undivided Family, (iii) a company, (iv) a society, (v) a limited liability partnership. (vi) a firm, (vii) an association of persons or body of individuals, whether incorporated or not, (viii) Government, (ix) a local authority, or (x) every artificial juridical person, not falling within any of the preceding sub-clauses; I find in the instant case that the overseas vendors (persons) are carrying out some activity for another person (the Party le.M/s HAL) for consideration (amount paid to overseas vendors). Above all as per the concept of taxability of services introduced with the introduction of the concept of Negative List w.e.f. 01.07.2012, it was also clarified that all services are taxable except those; mentioned under Negative list prescribed under Section 66D of the Finance Act. 1994 OR those exempted vide Mega Exemption under Notification No.25/2012-ST dated 20.06.2012 Since in the present case, I find that the nature of services rece....
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....le service provided or agreed to be provided by any person which is located in a non-taxable territory and received by any person located in the taxable territory, the recipient of such service: SECTION 168. Payment of service tax. (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of (such taxable services as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such monner as may be prescribed at the rate specified in section 66 and all the provisions of this Chopter shall apply to such person as if he is the person liable for paying the service tax in relation to such service:] [Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider]. In view o....
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.... case. In this regard, I find that the demand in the subject show cause notice is raised under Section 73(1) of the Finance Act, 1994, the contents of which relevant at the time of issuance of show cause notice are as follows:- "SECTION [73. Recovery of service tax not levied or paid or short- levied or short-paid or erroneously refunded. - (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, (Central Excise Officer] may, within [thirty months] from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short- paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in -the notice: Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of - (a) fraud; or (b) collusion, or (c) wilful mis-statement, or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules m....
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....ention of any provisions of this Chapter or of the rules ma thereunder with intent to evade payment of service tax:- In order to prove t element it has to be proved that the person charged contravened or did n properly followed the provisions of the Finance Act, 1994 intentionally to avc the payment of tax. In any case if it is proved that any one of the above elements are preser then extended period can be invoked. In the present case, the Party has contested the invocation of the extended period on the ground that for the purpose of invoking the extended period, the Adjudicating Authority has to first substantiate the demand of service tax, failing which the adjudicating Authority can not hold that the values for the subject item were supposed to be declared in the returns and non-declaration of the same amounts to willful suppression. Therefore, the Party has submitted that demand of service tax on any item appearing in the trial balance and invoking of extended period is not the principle of taxation. Further, the Party has submitted that the Adjudicating Authority has to prove the intention of the Party to evade the payment of Service tax in terms of Section ....
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....e been conducted by the department. Accordingly. I hold that the extended period of limitation is applicable to the present case." 4.3 From the above paras of the impugned order, it is evident that the fact of actual amounts paid by the appellant have not been considered. It is specific stand of the party before the Commissioner that the entries against which the current demands are being made in the book entries as per the Indian Accounting Standard have not been considered. The impugned order itself records that these amounts would already subject to matter of show cause notice issued by the divisional office earlier to the appellant. This fact could have been verified by the adjudicating authority and the findings recorded rather than observing non-submission of any evidence in this regard. 4.4 Indian Accounting Standard (Ind AS) 38 provides as follows:- 9. Entities frequently expend resources, or incur liabilities, on the acquisition, development, maintenance or enhancement of intangible resources such as scientific or technical knowledge, design and implementation of new processes or systems, licences, intellectual property, market knowledge and trademarks (incl....
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....ed consistently from period to period, unless there is a change in the expected pattern of consumption of those future economic benefits." Disclosure General 118 An entity shall disclose the following for each class of intangible assets, distinguishing between internally generated intangible assets and other intangible assets: (a) whether the useful lives are indefinite or finite and, if finite, the useful lives or the amortisation rates used; (b) the amortisation methods used for intangible assets with finite useful lives; (c) the gross carrying amount and any accumulated amortisation (aggregated with accumulated impairment losses) at the beginning and end of the period; (d) the line item(s) of the statement of profit and loss in which any amortisation of intangible assets is included; (e) a reconciliation of the carrying amount at the beginning and end of the period showing: ^6Substituted vide Notification No. G.S.R. 365(E) dated 30th March, 2016 and, thereafter, substituted vide Notification No. G.S.R. 310(E) dated 28th March, 2018. Prior to substitution in 2016, the paragraph read as under: ....
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.... 38A and not consideration for receipt of any service during the period of dispute. In fact appellant have not received any service from foreign vendor during this period for which they were required to pay service tax on reverse charge basis against this expense. Further in case of Firm Foundations & Housing Pvt. Ltd [2018 (16) G.S.T.L. 209 (Mad.)] Hon'ble Madras High Court has observed as follows "15. AS 7 thus provides for a detailed methodology for the reporting and determination of the percentage of income from the contract over the term of the project and sets out the mode of computation for arriving at the same. The basis of such recognition and reporting is the apportionment of the income earned and expenditure incurred over the tenure of the project. This is entirely different and distinct from the scope, object and application of the Point of Taxation Rules that seeks to set out a methodology for determination of when the service was rendered and consequently when the receipt of income from such rendition be taxed. 16. The emphasis and thrust of each methodology is in alignment with the different purposes that they bear reference to - AS 7, in the contex....
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.... initial landmarks as a lump sum and that the said amount has been offered to tax. It was then incumbent upon the respondent to have, in the light of the stand adopted by the petitioner in its Service Tax Returns, to have examined whether the receipts offered to tax correspond and cover the stages in respect of which consideration has accrued as per the agreement with the customer. 24. Rule 3(a) and (b) provides for the point of taxation to be either the point of raising of invoice [Rule 3(a)] or in a case where the service provider has received the payment even prior to the time stipulated in the invoice, upon receipt of such payment [Rule 3(b)]. In the present case, no invoice is said to have been raised. However, the petitioner confirms that it has, in fact, received lump sum advances corresponding to several initial landmarks in the contract, even prior to the achievement of such landmarks. As per the provisions of Rule 3(b), the entire sum received thus becomes taxable upon receipt and according to Mr. Prabhakar, has been offered to tax. 25. Instead of such determination by application of the provisions of Rule 3, the respondent relies upon the P and L accoun....
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....ough the entire case records. It is his submission that addendum issued by the Revenue is incorrect inasmuch as that the said addendum was issued after considering the written submissions made by the appellant-assessee. It is his submission that Revenue is trying to improve upon that case after considering the defence raised by the assessee. On merits, it is his submission that the contract entered by the appellant-assessee is on behalf of the Republic of India for the supply and transfer of licence for production of fighter aircraft, engines, air borne equipments. The said agreement was entered on 28 December, 2000 accordingly, appellant-assessee paid the amounts to the foreign-based firm. He would take us through the agreement which was produced for perusal of the bench and submits that the findings do not indicate as to how the services can be construed as scientific or technical consultancy services. Learned Counsel would submit that there is no basis to hold that it would fall under the definition of the services "scientific and technical consultancy service" as provided under Section 65(60) of the Finance Act, 1994. He would submit that said definition would be applicable onl....