TaxTMI 
TaxTMI 
2025 (8) TMI 1142
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.... During an audit conducted by the Large Taxpayer Unit's audit wing in September 2013, on examining the records, the Department observed that the expenses at the overseas officers are booked in the appellant's account. The Department was of the view that in as much as the offices located abroad are deemed to be a separate person for the purposes of Section 66A and the expenses incurred in these officers are booked into the expense account of the appellant it is implied that services are being rendered by the overseas officers of the appellant to the operations of the appellant in India, which would fall in the definition of the erstwhile business support services classifiable under Section 104(c) of the Finance Act 1994. The Department was therefore of the view that irrespective of the reasons for the expenses incurred at the overseas offices, the objective of the overseas offices is to bring in business to the appellant and that it is for that reason that the said expenses are booked in the appellant's account. 3. Revenue was of the view that the appellant is required to pay service tax on the entire reimbursed amount under reverse charge mechanism, and that had it not been ....
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....ontinental Consultants & Technocrats Pvt Ltd v UOI, 2013 (29) STR 9 (Del). d) This is purely a matter of legal interpretation with no element of tax evasion or wilful misstatement, so no penalties should apply. e) Reliance was placed on the decisions in Steel Authority of India Ltd v CST, New Delhi, 2020 SCC Online CESTAT 1747, CCT v Indo US MIM Tec (P) Ltd, 2024 SCC Online CESTAT 1505, Torrent Pharmaceuticals Ltd v CST, Ahmedabad, 2015(39) STR 97 (Tri-Ahmd), KPIT Technologies Ltd v CCE, Pune, 2014 (36) SGTR 1098 (Tri-Mumbai), KPIT Technologies Ltd v CCE, Pune,2017 (7) GSTL 468 (Tri-Mumbai), Intercontinental Consultants & Technocrats Pvt Ltd v UOI, 2013 (29) STR 9 (Del) and Krishna Auto Sales v CCE & ST, 2015 (40) STR 1121 (Tri-Del) in this regard. 6. Shri. Sanjay Kakkar, Ld. Authorised Representative, appearing for the Respondent reiterated the findings in the impugned OIO and placed reliance on the decisions in Glyph International Ltd v UOI, 2012 (25) STR 209 (All), M/s. Prithvi Information Solutions Ltd v CCT, GST, 2025 (2) TMI 901-Cestat Hyderabad, 3I Infotech Limited v CST, Mumbai-II, 2017(1) TMI 437-Tri Mumbai and M/s Sahara India v CCE, Lucknow, 2024 (2)....
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....Tribunal in KPIT Technologies Ltd. (supra). The Tribunal after analysing the provisions of Section 66A held as follows: "5. We have carefully considered the submissions. The short question for consideration is whether a branch of a corporate body situated abroad can be said to have rendered a service to the head office of the body corporate situated in India. Section 66A in our prima facie view, does not provide for such a situation. In the facts of the case before us, the branch situated abroad has rendered service to the foreign clients and tax liability has been discharged abroad. The branch situated abroad has incurred certain expenditure which has been reimbursed by the head office to its branch office. Such reimbursements of expenditure by way of salaries or other expenses cannot be said to be consideration paid for any service rendered by the branch to the head office. The purpose of Section 66A is for taxing the import of services and not for taxing monetary transactions between the branch and head office. For e.g. if a branch of an Indian bank is situated abroad, Section 66A does not envisage treating the foreign branch as a separate entity so far as the internal ....
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....s not been able to show that ITSS has been received through their branch office in India and in the absence of receipt of service, in our opinion, there is no taxable event and therefore there is no liability on the receiver to pay tax. Therefore, the entire demand of Rs. 132,35,71,266/-cannot be sustained and has to be set aside and is set aside." 9. Following the ratio laid down in the aforesaid judgments, we do not see merit in the appeals filed by the Revenue. Consequently, the impugned order is upheld and the appeals are rejected. The Cross Objections filed by the Respondents are in the nature of written submission, accordingly, disposed of." 10. Likewise, in the decision in Steel Authority of India Limited v. Commissioner of Service Tax, New Delhi, reported in 2020 SCC OnLine CESTAT 1747, the Principal Bench of this Tribunal at Delhi, has held as under: "11. The submissions advanced by the learned counsel for the Appellant and the learned Authorised Representative have been considered. 12. The show cause notice issued to the Appellant alleges that the Appellant received services from the overseas office in China which is for furtherance of busine....
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....stablishment, permanent address or usual place of residence, in India, Such service shall, for the purposes of this section, be the 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....
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....esentative offices/branches towards salary paid to the employees and cannot be considered as a service and will not attract service tax. That for the employment of people appellant entered into employment agreement with employees in overseas branches where appellant is clearly shown as an employer and the amount paid to the employees is reflected as salary in their books of accounts and in the financial statements. That relationship between employer and employee clearly is a master-servant relationship and cannot be considered as taxable services as per Section 65(105) of the Finance Act, 1994. That the adjudicating authority has considered the branch offices of the appellant located outside India as a separate legal person in view of Section 66A(2) of the Finance Act, 1994. It is the case of the appellant that one cannot provide services to one own-self, therefore, by creating a fiction in Section 66A(2) of the Finance Act, 1994, it cannot be said that branch offices of the appellant is to be considered as a separate legal person for the purpose of charging service tax on reverse charge basis". [Emphasis supplied] 18. Ultimately, the Tribunal held: "Section 66....
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....ess establishment, the services rendered by such establishment should be treated for tax liability. -------------- 8. The ratio of the above decision and also the close reading of the proviso to Section 66 A along with explanation therein is make it clear that the legal fiction of considering a branch of an assessee as a separate establishment is not to tax a service rendered to its head office. Further, here there is no such service also has been identified with supporting evidence. 9. We find that the ratio adopted by the Tribunal in examining the application of the said proviso is appropriate to the facts of the present case and accordingly, we hold that the tax liability under BAS cannot be sustained. We note here that the whole expenses now sought to be taxed are only with reference to setting up, running and also expenses of the branch incurred by the appellant and not relating to any expenditure in their branches with reference to BAS". [Emphasis supplied] 20. It is clear from the aforesaid two decisions that section 66A (1) refers to 'service provider' and 'service recipient' as 'persons' which would mean different business persons. Se....
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....erefore, not be necessary to examine the contention of the Appellant that the extended period of limitation could not have been invoked in the present case. 25. Thus, for all the reason stated above, the impugned order dated 26 November 2015 passed by the Commissioner (Appeals) is liable to set aside and is set aside. The Appeal is, accordingly, allowed." 11. In light of the aforesaid decisions of this Tribunal, we are not persuaded to take a different view and we hold that the demand of service tax on the entire reimbursed amount of expenses of these overseas offices under reverse charge mechanism, confirmed invoking Rule 5(1) of the Service tax (Determination of Value) Rules 2006, on the allegation that the appellant is receiving business support services, save for that which already stood conceded by the appellant, is untenable and cannot sustain. For the aforesaid reasons, we find that the decisions relied upon by the Ld. A.R also do not advance the Respondent's case in any manner. Further, we do not find any merits in the submission of the Ld. A.R. that the matter may also require verification whether the payments were indeed made for the purposes stated and are in....