TaxTMI 
TaxTMI 
2021 (10) TMI 1469
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....ervices from persons located abroad who do not have office/establishment in India. 2.2 Investigations were taken up against the respondents. Respondents filed for settlement of various dues against them under VCES 2013 (Voluntary Compliance Encouragement Scheme) and admitted tax liability of Rs 5,53,52,622/- and also paid the admitted liability for the period October 2008 to 2012. 2.3 However, investigations showed they had not fully disclosed the tax liability. A show cause notice dated 20.01.2014 demanding service tax of Rs 3,95,24,635/- under reverse charge, was issued to them under the category of services as detailed below: Sr. No Category of Service Amount in lacs (Rs.) 1 Exhibition expenses 27.34 2 Foreign Sales Representative Salary & expenses through customers - 58.54 3 Foreign travelling expenses 73.99 4. Imported books and description 5.29 5 Marketing clinical trial expenses 19.22 6 Other expenses 38.50 7 Product promotion expenses - Through customers 71.72 8 Reimbursement of Product claim in USA - Ranbaxy USA 25.91 9 Business Auxiliary Service 74.74 T....
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....lectual Property Right portion of the cost of software brought in Service Tax net w.e.f 2008 under the taxable category of IT Software Services under Section 65(105)(zzzze) of the Finance the Act, 1994. • from the bills produced by the respondent toward reimbursement of product liability claim,, which is difficult to ascertain or otherwise whether the same are for purely litigation purposes. The major component of the bill appears to be of Superior Documents Service, which appear to be not connected with the litigation cost but other services. • reliance placed by the Commissioner on decision of Hon'ble Apex Court in case Nizam Sugar Factory Ltd.'s to hold that demand is barred by limitation is without any basis. In the present case, the respondent is required to undertake self assessment of the Service Tax liability and no detail information is made available to the Department, therefore, there has been no means to have knowledge of event and circumstances on periodical basis. Hon'ble Gujarat High Court in the case of Neminath Fabrics Pvt. Ltd. - 2010 (256) ELT 369 (Guj), has held that knowledge of the department is not relevant to for determining....
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....y by the distributors, then no Service Tax is payable on reverse charge in India. Also referred to the judgment of this Tribunal in the case of Cummins Infosystems Ltd. [2014 (33) STR 105 (Tri-Mum)]. • the demand for purchase of CD has been raised under the head other expenses in the notice and not under the purchase of imported goods. The finding of the Commissioner, the expenditure is incurred on purchase of books and subscription of various magazines, which are considered as goods hence not liable to Service Tax is as per the judgment of Hon'ble Delhi High Court in the case of G.D. Builders [2013 (32) STR 673 (Del)]. • the purchase of CD was not included in the scope of demand relating to purchase of imported books, the demand was raised under "other expenses" in the notice. • imported data in CD form has been held to be goods by the Hon'ble Supreme Court in the case of Associated Cement Companies Ltd. [2001 (128) ELT 21 (SC)]. It is his contention that no customs duty is payable as data is classified under Chapter 49 with Nil rate of duty. • for the reason that value for purpose of customs duty is not properly declared....
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....l of the revenue it is evident that it is not against the dropping of entire show cause notice but is restricted in respect of services indicated in table below. S No. Category of Service ST Amount in lacs (Rs.) 1 Foreign Sales Representative Salary & expenses - through customers 58.54 2 Imported books and description 5.29 3 Product promotion expenses - Through customers 71.72 4 Reimbursement of Product claim in USA - Ranbaxy USA 25.91 Total 161.46 4.3 The findings of Commissioner relevant for consideration of this appeal are reproduced below: "b) Foreign Sales Representative salary & expenses - through customers, The assessee in their reply has submitted that they are engaged in manufacture and export P & P medicaments to various countries. They have appointed distributors in different countries to whom the goods are exported for sale of medicaments to Hospitals, Doctors, Retailers etc. The distributors have appointed sales representative to promote the product. Sales representative approach various Doctors, Hospitals and other places for promotion of products purchased by the distributors. Salary and various....
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....es promotion. The show cause notice also does not specifically give any evidence to substantiate that sales promotion is for the products belonging to the assessee and is carried out as per the direction of the assessee. 4.08 In the additional submission, the assessee has submitted statement of reimbursement of 9 Distributors/ Country Managers along with invoice of some local service provider to substantiate that VAT has been charged by the service provider. For example M/s Trident Healthcare Ltd is the distributor in Mauritius, They have submitted invoice for April 12 seeking reimbursement of US$ 2135 with salary of sales representative US$1645 and marketing expenses which is the hotel expenses of US$ 490. Invoice of Hotel viz. M/s. Rozi Darbar attached with the debit note indicates that VAT @ 15% has been charged by the Service Provider. This substantiate that local service provider charged VAT. The Hon. Tribunal in the case of Torrent Pharmaceuticals Ltd 2014 CESTAT AHM has held that mere reimbursement of expenses will not attract service tax. The service shall be received in India in order to levy service tax. One of the criteria to ascertain receipt of servic....
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....olesalers etc. These distributors have appointed sales representatives for promotion of the product. Sales representatives incur different type of expenses like conveyance, telephone etc, while promoting the product. In addition to this, the distributors also incur expenses in promoting the product like call charges, meeting expenses with Doctors etc. They have been charging local VAT on the services provided to the local distributors. 4.21 The Hon. Tribunal in the case of Torrent Pharmaceuticals Ltd., 2014 (12) TMI 41 - CESTAT AHM has held that mere reimbursement of expenses will not attract service tax. The services shall be received in India in order to levy service tax under reverse charge. One of the criteria to ascertain receipt of service in India is to verify whether local VAT has been charged. In case local VAT is charged, as per the ratio of the said judgment, it was submitted that services which have been used outside India on which local VAT has been charged cannot be considered to be received in India. Hence, such reimbursement of expenses cannot be held to be liable for payment of service taxi 4.22 The Hon. Delhi High Court in the case of Intercontin....
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....4) of Section 94 of the Act, every rule framed by the Central Government shall be laid before each House of Parliament and that the House has the power to modify the rule. As pointed out by the Supreme Court in Hukam Chand v. Union of India, AIR 1972 SC 2427: - "The fact that the rules framed under the Act have to be laid before each House of Parliament would not confer validity on a rule if it is made not in conformity with Section 40 of the Act." Thus Section 94 (4) does not add any greater force to the Rules than what they ordinarily have as species of subordinate legislation. 4.23 The ratio of the judgment of Hon. Delhi High Court applies with equal force in the present case in view of the provisions contained in Rule 7(1) of Service Tax (Determination of Value) Rules 2006. In view of this, these expenditures cannot be held to be liable for service tax. i), Reimbursement of product liability claim in USA to Ranbaxy, USA:- The assessee was jointly marketing the product "Metoclopromide Tablets" with M/s Ranbaxy in USA. It is available I generic but is commonly referred as Regian. This medicine has certain side effect. The patients who consumed the medic....
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....Intelligence bearing No. DGCEI/ MZU/I&IS'C'/ 30-57/07/7454 dated 22.10.2008. Copy of the said show cause notice is attached with the reply to show cause notice. It is observed that the assessee has disclosed the nature of expenditure being incurred by them under different categories. Thus the fact that the assessee have been receiving different type of services from person located outside India was known to the department. The Hon. Supreme Court in the case of Nizam Sugar Factory 2008 (9) STR 314(SC) has held that subsequent show cause notice cannot be raised with extended period of limitation. Following the ratio of the said judgment, the demand is also hit by limitation. The show cause notice is issued in January 14. The normal period is 18 months from the relevant date. Therefore, the demand upto March 12 is found to be clearly hit by the limitation of time bar. k) Revenue neutral - The assessee is manufacturing P & P medicaments and paying excise duty on clearance of the same. All the services received by the assessee are considered input services as defined under rule 2(1) of Cenvat Credit Rules. Therefore, service tax paid on the services received by the asse....
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.... promotional expenses" and "marketing expenses" etc. The invoices do not contain any breakup of the expenses, nor do the debit notes. The appellant have claimed that these amounts are spent by the distributor for promotion of their own products and therefore they are not covered by the "Business Auxiliary Services". The appellants are relied on the decision of Tribunal in the case of Genom Biotech Pvt. Ltd. v. CCE, Nashik - 2016 (42) S.T.R. 918 (Tri.-Mumbai) to assert that no Service Tax liability would come under the head of "Business Auxiliary Services". In the said decision following has been observed as under :- "15. Services that are not connected with manufacture or with the transport of goods till the customs frontier of the country can be disassociated from use within the country and hence would not lie within the ambit of the legal fiction of import of services. Services that are undeniably rendered by a foreign 'service provider' in relation to the goods sold abroad cannot be presumed to be covered by the legislative intent to tax. To tax a service using the legal fiction of import and then reimburse that tax because the service was not required for any activity ....
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....ered in connection with business or commerce outside the territory of India. Since the appellant has no requirement of 'advertising agency service' for manufacture and export of goods, the tax demanded in the impugned order is not on the consideration for a service received in India but a tax on the funds transferred in a cross-border transaction. Such a tax is not contemplated in Finance Act, 1994. The demand of tax on the appellant is not in accordance with law." Relying on the said decision, it is held that no Service Tax can be demanded on the said service. The demand under the head of "Business Auxiliary Services" is therefore set aside. " 4.5 In the case of M/s Torrent Pharmaceuticals, KPIT Cummins Infosystems Ltd it was held that once local VAT & GST is paid, then the services are received in that country by the distributor. Therefore, no tax is payable on reverse charge in India. 4.6 The distributors not the agent of the respondent. The reimbursement of foreign promotion expenses will not form part of the value of taxable service. The judgement of the Delhi High Court in the case of M/s. Intercontinental Consultants & Technocrats Pvt. Ltd has been affirmed by....
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....nd same will not be liable to service tax, as the expenses incurred are in nature of reimbursable expenses. 4.1 While upholding the decision of the Hon'ble Delhi High Court in case of Intercontinental Consultant and Technocrats on the issue of reimbursable expenses referred earlier, Hon'ble Supreme Court has held as follows: "10. The High Court, after taking note of the aforesaid provisions, noted that the provisions both amended and unamended Section 67 authorised the determination of value of taxable services for the purpose of charging service tax under Section 66 (which is a charging section) as the gross amount charged by the service provider for such services provided or to be provided by him, in a case where the consideration for the service is money. Emphasising on the words 'for such service', the High Court took the view that the charge of service tax under Section 66 has to be on the value of taxable service i.e. the value of service rendered by the assessee to the NHAI, which is that of a consulting engineer, that can be brought to charge and nothing more. The quantification of the value of the service can, therefore, never exceed the gross amount charged by....
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....nditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the Learned Counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited [(2015) 1 SCC 1] wherein it was observed as under : "27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of....