TaxTMI 
TaxTMI 
2025 (5) TMI 155
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.... providing services of erection, commissioning and installation services, Works contract service, Maintenance & repair services, Business Support service, Commercial training & coaching service, Market research agency, Management Consultants, Manpower Recruitment agency, Storage & Warehousing service, Technical Inspection & Certification, GTA, and Sponsorship service etc. and are registered with Service Tax Department. Revenue got the audit of the records of the appellant, conducted by a special auditor, M/s Gianender & Associates, under Section 72A of the Finance Act,1994; On the basis of Scrutiny of the Records, it appeared to the department that the appellant evaded payment of service Tax, on various services, as below. Category of service Amount Remarks Management or Business Consultancy Services received from outside India 2011-12 3,66,07,637 Expenses incurred under project management service in favour of M/s. Huawei Technology Limited, China Market Research Agency Services claimed as Export of Service (2010-11 to 2011-12) 11,92,94,464 Appellant paid service tax under Business Auxiliary Service and claimed rebate/refund erroneously whereas the said s....
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....-Original, dated 14.06.2018, partly dropping and partly confirming the demands raised along with imposition of interest and penalty. The order summarized in respect of Show Cause Notice dated22.01.2016 is as follows. Category of service Amount of Service Tax demanded Order in OIO Management or Business Consultancy Services received from outside India 2011-12 3,66,07,637 Dropped the demand holding that the services provided by Huawei, China in Nepal falls under Erection, Commissioning or Installation service and not under Management or Business Consultancy Services as alleged in the SHOW CAUSE NOTICE. Market Research Agency Services claimed as Export of Service (2010-11to 2011-12) 11,92,94,464 confirmed the allegation of SHOW CAUSE NOTICE and ordered for recovery of erroneously sanctioned rebate/refund under proviso to section 73(1) along with interest and equal penalty under section 78 of the Act. Banking and other Financial Services under RCM-Corporate Guarantee given by M/s. The Overseas Associate Enterprises to Banks on behalf of appellant (2010-11 to 2014-15) 10,69,70,856 (SHOW CAUSE NOTICE dated 22.01.2016) confirmed the demand of service ta....
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.... 18.04.2019, was issued for demand of service tax on the issue of Corporate Guarantee for the period from 2016-17 to 2017-18 (up to June 2017). Commissioner, vide Order-in-Original, dated 08.01.2020, confirmed the demand of service tax of Rs 2,92,14,000/- along with interest and penalty of Rs. 50,00,000 under Section 76 and a penalty of Rs. 10000 under section 77 of the Act. Being aggrieved, the appellant has filed appeal No. ST/60160/2020. 3. Shri Tarun Gulati, Learned Senior counsel for the appellants submits that Appeals Nos. ST/61636/2018 (by assessee ) and No. ST/61696/2018 (by Department's Appeal) are against common Impugned Order dated 14.06.2018, vide which, Learned Commissioner rejected the appellant's claim of export Business Auxiliary Services, confirmed demand on account of corporate guarantee services received from overseas associated enterprises and irregular availment of Cenvat Credit along with interest and penalties but dropped demand on account of alleged import of "Management or Business Consultancy Service" and alleged differences on re-conciliation between financial statements and ST-3 returns; Appeal No. ST/60160/2020 (by the appellant) was filed agains....
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....ture of actual performance of the work, the same cannot be treated as any advice or consultancy; he relies on CBEC Circular dated 27.06.2001 and M/s Sugar Mills Co. Ltd., 2012 (25) STR J154 (SC), wherein it is held that delegation of entire operation does not amount to merely rendering an advise or consultancy; the terminology used in financial statements and invoices cannot be solely considered for determining classification as held in ONGC Ltd - 2017 (6) GSTL 537 (Tri. Mumbai); British Physical Laboratories (1) Ltd 1999 (107) ELT 107 (Tri); Basti Sugar Mills Co. 2007 (7) STR 431 (Tri Del.) and 2012 (25) STR H154 (SC); Merti Trac Services Pvt Ltd - (2023) 10 Centax 74 (Tri. Bang.); Daelim Industrial Co. Ltd - 2003 (155) ELT 457 (Tri. Del.) and 2007 (5) STR J99 (SC) and TGL Poshak Corporation- 2002 (140) ELT 187 (Tri-Chennai). Service Tax demand of Rebate Claimed under "Market Research Agency" services 5. Learned Senior Counsel submits that Learned Commissioner Confirmed demand of Rs. 11,92,94,464/-along with equivalent penalty and interest, for the period, December 2010-March, 2011 on the grounds that the subject services appear to be MRAS as the Assessee is supposed to expl....
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....tries India Ltd 2016 (337) ELT 189 (Mad.) and BT (India) Pvt Ltd (2023) 13 Centax 89. Service Tax on the commission payable on corporate guarantee received from the overseas associated enterprise (Appeal No ST/ 61636/2018 and ST/60160/2020) 6. Learned Senior Counsel submits that the Impugned Orders confirmed demand of Rs 4,66,09,376 and 2,92,14,000 along with interest and penalty, for the period December 2010-March, 2014, on the ground that the term banking and other financial services in Section 65(12) encompasses various services including bank guarantee; Function of bank guarantee is akin to corporate guarantee; the activity/transaction involves benefits to Huawei and in the absence of this activity/transaction, it would have incurred certain costs and the value of consideration was determined @ 2% of the guaranteed amount relying on the Safe Harbour Rules. 6.1. Learned Senior Counsel submits also that there is no service nor any consideration involved in cases where corporate guarantee is provided by the associated enterprises to the banks for working capital related loans required; it is held in a number of cases that no Service Tax, under the category of banking and ....
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....on 78; Rule 14 of the Cenvat Credit Rules was subsequently amended by Finance Act. 2012 as per which interest is levied in case where the Cenvat Credit has been availed as well as utilised wrongly; in the present case, the Cenvat credit was not utilised; he relies on M/s Strategic Engineering (P) Ltd 2014 (310) ELT 509. Double availment of CENVAT credit on input services; Time Bar; Penalties etc 9. Learned Senior Counsel submits further that the appellant has paid of Rs. 92,78,438 towards Service Tax liability along with interest of Rs. 44,82,945, on the double availment of Cenvat credit and Service Tax liability on various other services; impugned order appropriates the same and imposes penalty of equivalent amount; the appellant has not committed any positive act in order to wrongfully avail Cenvat Credit; moreover, the amount of demand was paid along with interest before Issuance of Show Cause Notice; as held in Bio Med Health Care Products 2015 (37) STR 381 (Tri.-Delhi) and DLF Home (supra) no show cause notice is required to be issued under Section 73(1) of the Finance Act, 1994, in terms of Section 73(3), where the Assessee pays the service tax; no penalty is imposable.....
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....e Finance Act, 1994 shall be valid; clause (1)(e) of section 174 of the CGST Act is a savings clause for continuing with, amongst others, assessment proceedings, adjudication or any other legal proceeding initiated/to be initiated under the repealed Acts; the position has been accepted by various Courts & Tribunals; he relies on the decision of Hon'ble High Court of Guwahati in the case of Laxmi Narayan Sahu 2018 (19) G.S.T.L. 626 (Gau.) Submissions on claim of the appellants that the services provided by them qualify as business auxiliary service (BAS) 11. Learned Special Counsel takes us through various clauses of the agreement, CBEC Letter No. 11/3/98-TRU dated 07.10.1998 and submits that it may be noticed from the key features of the two agreements that though the wordings have changed in the agreement of 2009, yet the nature of the major and significant services undertaken by the appellant viz. "providing information on customers", "Liaising with customers for obtaining inquiries or feedback or correspondence concerning the products", "development of market plan or providing information related to Indian market, customers, vendors etc" did not change even after April....
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....e appellant has not been considered by the Commissioner as the same was not submitted before him; the same is not acceptable at this stage being an additional ground; even otherwise, the entire service of MRAS is being provided in India and merely by sending report to China/ Singapore, the same cannot fall under the category of export of service as claimed by the appellant; the case of Medallion Consulting relied upon by the appellant is based on facts which are not relevant to the case in hand and the appellant has not brought any evidence on record any report on market research sent to their service recipients; he relies on Alnoori Tobacco Products 2004 (170) ELT 135 (SC), Srikumar Agencies 2008 (232) ELT 577 (SC) and Allied Airconditioning Corporation 2006 (202) ELT 209 (SC) and submits that cases with no comparable facts cannot be relied upon. On the submission that refund cannot be demanded back without appealing against the order sanctioning refund. 14. Learned Special Counsel submits that this plea was also not raised before the adjudicating authority, as the same has not been addressed in the impugned order. Hence, its being an additional ground, which was not adjudic....
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....o the bankers of the appellant for working capital demand loans; appellant expressed inability to submit Board Resolution, credit sanction advice letters of the bank and other details; a corporate guarantee is usually given by a company to another group/related party, which is used as a security by the Bank or Financial Institution extending loans to the said related party; corporate guarantee is used as a substitute to Bank Guarantee; it helped in reduction of the cost of funding in the form of lower rate of interest to the appellant; it benefitted the appellant in two ways, one in form of lower rate of interest on loans and secondly in the form of zero cost for corporate guarantee to be provided to the lender/ bank; taxable value in the matter has to be determined under section 67(1)(ii) of the Act read with Service Tax (Determination of Value) Rules 2006 (Valuation Rules in short); SHOW CAUSE NOTICE has applied a notional rate of 2% as prescribed for International transactions between Associated Enterprises as per Rule 10TC(V)(a) of Safe Harbour Rules in Income Tax Law, for the purpose of determining the taxable value; the plea of the appellant that corporate guarantee is not ak....
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....ct value, no service tax can be charged; they rely on Indus Motors Ltd 2008 (9) STR 18 (Tri. Bang), Jabalpur Motors Ltd 2014 (36) STR 1160 (Tri. Delhi), Circular No. 62/11/2003 dated 21.08.2003 and Circular No. 354/59/2006-TRU dated 10.11.2006. Learned Special Counsel submits, in reply, that this plea of the appellant has been dealt with in detail in para 27.7 to 27.11 of the impugned order, conceding that no consideration was actually paid by the appellant to Huawei Tech; however, the provisions of section 67(1)(iii) of the Act clearly become operational in such kind of situation, where the activity involves benefit to the appellant as in absence of such corporate guarantee they would have incurred certain cost for seeking loans from the banks as per prevalent practice; Rule 3(b) of Valuation Rules, 2006 provides the manner of determination of value stating in cases where the value cannot be determined as equivalent money value of such consideration; notional value was taken as per Safe Harbour Rules for the corporate guarantee given in international transaction; hence, the same cannot be found to be unreasonable at all; the case laws relied upon by the appellant are not applicabl....
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....mation of demand for extended period of demand, equal penalty becomes imposable under section 76/ 78 of the Act. He relies on the following cases. Pratibha Processors Vs UOI 1996 (88) ELT 12 (SC) UOI vs Valecha Engg Ltd 2010 (249) ELT 167 (Bom) Dharmendra Textile Processors 2008(231) ELT 3 (SC) Rajasthan Spinning & Weaving Mills 2009 (238) ELT 3 (SC) Lark Chemicals Pvt Ltd 2016 (42) S.T.R. 417 (S.C.) 18. Learned Special Counsel submits, on the issue of demand of penalty and interest after reversal of CENVAT Credit, which was only availed but not utilised, before issuance of Notice, and Payment of Service Tax, for, that the provisions of Section 73(3) of the Act are applicable only subject to ingredients provided in Section 73(4) of the Act; since the case has been held to involve suppression of facts with intent to evade payment of service tax, the plea is liable to be rejected in terms of provisions of section 73(4) of the Act. Learned Special Counsel submits, on the issue of applicability of interest when credit availed is reversed without utilization, and appellant's reliance on the case of M/s. Strategic Engineering (P) Ltd. 2014-....
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....nder Section 80 for waiver of penalty under Section 80, the appellant has not been able to justify the reasonable ground and bona fide belief as required in the said section; the appellant has not paid the tax amount along with interest even after being pointed out by the department; hence, the plea of bona fide belief cannot sustained and claim is liable to be rejected. 21. Heard both sides and perused the records of the case. Brief issues that require consideration in the appeals are as to (i) whether the Learned Commissioner was correct in dropping the demand of Rs 3,66,07,637, on services received from M/s HTCL, China, during 2011-12, holding that the services provided by Huawei, China in Nepal fall under 'Erection, Commissioning or Installation service' and not under 'Management or Business Consultancy Services' as alleged in the Show Cause Notice. (ii). whether the Learned Commissioner was correct in dropping the demand of Rs 6,75,40,376, on the basis of reconciliation submitted by the appellant during adjudication, out of the demand issued on the basis of discrepancy of accounts?? (iii). Whether the appellants are eligible to rebate of Rs 11,92,....
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....sification of the services, the activities undertaken by the sub-contractor need to be looked as a whole and not in piecemeal; the sub-contractor was awarded the contract of installation of 2G/3G network rollout; the role of the appointed sub-contractor was to perform the actual management/ installation function and not to render any kind of advice or consultancy only. Learned Commissioner further holds that the definition of Management Consultancy Services covers Advisory Service only and not the actual performance of the function. We find that learned Commissioner has considered a certificate, produced by the appellants, from M/s Huawei Technologies Co. Ltd., stating that activities undertaken by them as per the Agreement dated 09.12.2010 and that in order to undertake the principal activity of installation of equipment, the following activities were undertaken by Huawei, China: Physical handling of material to be installed, unpacking of Physical handling of material to be installed, unpacking of materials.materials. Verification of materials on the basis of agreed packing listVerification of materials on the basis of agreed packing list.. Installation ....
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....beyond the scope of the statute. 22.3. We find that the above decision of the Tribunal was upheld by the Hon'ble Supreme Court (supra). In the impugned case also, we find that under the sub-contracting agreement dated 09.10.2010, the works specified was roll-out of 2G/ 3G network in Nepal and was not restricted to mere consultancy or advice. Revenue argues that as per Note 37(B) to the financial statements of the balance sheets, the appellants have incurred the expenses under the Head "Project Management Service" and the invoices also described the work to be network roll-out. We are of the considered opinion that the nature of the work cannot be inferred from the terminology used in the books of accounts but it has to be taken from the terms of the agreement and the actual service performed. Roll-out of 2G/ 3G understandably involves laying of cables, towers etc. and as such, involves actual installation and not Consultancy or Management Service. Therefore, we find that there is no infirmity in the findings of the learned Commissioner, who has based his observations on the terms of the contract. To this extent, we find that Revenue has not made out any case for confirmation of ....
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....cerned. While holding that the principle adopted by the learned Commissioner is correct as discussed above, we are of the considered opinion that the issue must travel back to the adjudicating authority to reconcile the difference on the basis of the correct figures available in the records. 24. Next question, as at (iii) in Para 19 above, that requires to be addressed is as to whether the appellants are eligible to rebate of Rs 11,92,94,464, along with interest and equal penalty, considering the Market Research Agency Services, claimed as Export of Service, during 2010-11to 2011-12?? and as to whether it was open for the Revenue to Recover, the rebate already sanctioned, invoking proviso to section 73(1) along with interest and equal penalty under section 78 of the Act, holding the same to be 'Erroneous Refund' without reviewing/appealing against the rebate sanctioning order. We find that the appellants classified services under MRAS till March, 2010 and thereafter changed the classification to BAS; Adjudicating Authority confirmed the demand, for the period, December 2010 - March, 2011, on the grounds that the subject services appear to be MRAS, as the Assessee is supposed to ....
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....at the Learned Counsel for the appellants submits that the rebate has been sanctioned to them on the above account. The impugned order seeks to recover the rebate without filing any appeal against the rebate/refund sanctioning order. We find that refund was sanctioned by Order dated 26.12.2013 and no appeal was filed against such order. We find that Hon'ble High Court of Allahabad in case of Honda Siel Power Product 2020 (372) E.L.T. 30 (All.) held that 28. Thus, from the reading of provisions of Section 11A(1) of the Act, which provides for recovery of any duty of excise which has not been levied or paid or has been short levied or short paid or erroneously refunded. The recovery of such amount of excise duty can be made under Section 11A(1) irrespective of whether such non 11 levy or nonpayment or short levy or short payment or erroneously refund was on the basis of any approval, acceptance or assessment relating to rate of duty or on valuation of excisable goods under any other provisions of this Act, or Rules made thereunder. 29. Section 35 of the Act, provides for appeals to Commissioner (Appeals), wherein any person aggrieved by any decision or order passed ....
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....they attained finality. It was only after decision of the Apex Court in case of Addison and Company (supra) that show cause notice was issued on 17-8 2017, and order was passed on 30-11-2017 directing the petitioner for refund of excise duty to be deposited in Consumer Welfare Fund. 33. A careful reading of Sections 11A, 11B, 35 and 35E would reveal that an application for refund as envisaged under Section 11B is not to be dealt as a ministerial Act, or an administrative Act, rather an application has to be made by person claiming refund within a prescribed time and the application is to be accompanied by documents referred to in Sub-section (1) of Section 11B to establish that amount of duty of excise and interest, if any paid on such duty in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty and interest, if any, paid on such duty has not been passed on by him to any other person. It is on the receipt of this application, Assistant Commissioner or Deputy Commissioner of Central Excise, if satisfied may make an order for refund. Thus, it is only after the adjudication of the application that an order of refund of dut....
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....mmissioner can invoke proceedings for recovery under Section 11A(1) 12. 38. This could lead to a situation where power of recovery under Section 11A is invoked by a subordinate authority despite the fact that refund application has been adjudicated upon by a superior authority under Section 11B. 39. Through plain reading of Section 35E, it is clear that limited revisional jurisdiction is conferred upon Principal Commissioner and Commissioner of Excise in sub-section (2) of Section 35E, this power is not actually to correct any error directly, but only available for directing the competent authority to take matter to the Commissioner (Appeals). Meaning thereby that it is always open to Principal Commissioner or Commissioner or Central Excise to examine the order passed by adjudicating authority under Section 11B and direct the competent authority to file appeal against order of refund. In the present case, order of refund was never taken to higher forum and it became final. 40. Decisions relied upon by the counsel for the revenue in case of Jain Shudh Vanaspati (supra) relates to proceedings which were vitiated by fraud. Further, the Apex Court recorded a ....
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.... basis of "erroneous refund" under Section 11A so as to enable the refund order to be revoked, as the remedy lied under Section 35E for applying to the Appellate Tribunal for determination and not invoking Section 11A. 24.4. We find that the same principle was upheld in the cases of Eveready Industries India Ltd; BT (India) Pvt Ltd and Flock (l) Pvt Ltd - 2000 (120) ELT 285 (SC). Therefore, we are of the considered opinion that it is not open to the department to initiate proceedings to recover the refund sanctioned, unless a competent authority, duly empowered by law, holds that such refund was erroneous. Thus, the appellants succeed on all the three counts. 25. Coming to the issue, at question No (iv) as at Para 19 above, as to whether the appellants were required to pay service tax of Rs 10,69,70,856 plus Rs 3,96,38,520, along with interest and penalty on the reverse charge mechanism, on the Banking and other Financial Services, for the Corporate Guarantee given by the Overseas Associate Enterprises to Banks, during the period 2010-11 to 2014-15, on behalf of appellant, we find the adjudicating authority finds that the term banking and other financial services in Section 6....
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....ice tax on corporate guarantee provided by the appellant. We further take note of the fact that for the charges leviable on account of prime location charges etc., the appellant has already paid service tax along with interest before issuance of the show cause notice. Therefore, we hold that in terms of Section 73(3) of the act, the proceedings were not required to be initiated against the appellant, therefore, penalty imposed on the appellant is set 4 ST/61204/2018 aside. Accordingly, the impugned order is set aside, the appeal is allowed with consequential relief. 7. The Co-ordinate Bench, Mumbai in the case of Commissioner of CGST Vs Edelweiss Financial Services Ltd. (Final Order No. A/85986/2022 dated 16.02.2022) held that: 8. The criticality of "consideration" for determination of service, as defined in section 65B(44) of Finance Act, 1994, for the disputed period after introduction of "negative list" regime of taxation has been rightly construed by the adjudicating authority. Any activity must, for the purpose of taxability under Finance Act, 1994, not only, in relation 7 ST/87134/2018 to another, reveal a "provider", but also the flow of "consideration" for....
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....lants have deposited the entire demand before issuance of show cause notice. The appellants claim that as the credit was not utilized, there will be no question of payment of interest and penalty as held in Strategic Engineering Pvt Ltd (supra). We find that there is force in the argument of the appellants. Therefore, we are inclined to allow the appeal as far as this issue is concerned. 27. On the issue, as at Para 19 (vii) above, as to whether the appellants are liable to pay interest and penalty of Rs. 10,000/- under section 77 on various demands confirmed (Rs. 82,82,930 on double availment of Cenvat credit during 2010-11 +7 Rs 75,664 Short payment of service tax under RCM on import of services, during 2011-12 + Rs 3,60,500 on non-payment of service tax under RCM on expenses for Sponsorship services, during 2011-12 + Rs 5,59,344 on short payment of service tax under Erection and Commissioning and Installation Service, during 2010-11 to 2011-12), however the appellants submit that they have paid duty along with interest; even then penalty was imposed. Under the facts and circumstances of the case, where mens rea was not established, looking into the fact that the appellants ha....