TaxTMI 
TaxTMI 
2026 (1) TMI 515
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch 2010 Renting of immovable property - Rs.1,22,813/- Business Support Service - Rs.6,48,581/- Penalty -minimum penalty at the prescribed rates u/s 76 of FA, 1994 3. E/40007/2016 246/2015 (STA-I) dt. 29.10.2015 April 2010 to March 2011 Business Support Service - Rs.6,14,033/- Renting of immovable property - Rs.11,124/- Penalty at the prescribed rates u/s 76 of FA, 1994 and Rs.2000/- u/s 77 (2) of the FA, 1994 2. The relevant facts are that the Appellant is a manufacturer of automative fasteners registered for providing Consulting Engineer Services, (CES), Business Auxiliary Services, (BAS), Testing Inspection and Certification Services (TICS) and Intellectual Property Services (IPS). During the scrutiny of the appellant records, it was found that the appellant had incurred expenses towards warehouse related services in USA and have also realized lease income for renting out their windmills to their group Company M/s. Sundaram Non-conventional Energy Systems Ltd. for use in their project for generation of power. 3. The Department asked the Appellant as to the nature of activity of the service providers abroad pertaining to the warehouse related se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat the service providers of the appellant abroad were rendering complete logistics services, the classification of such activities under business support services itself is incorrect, and if at all, it can only be classified as "clearing and forwarding agency service' under Section 65 (105) (j). 6. Without prejudice, the Ld. Counsel submits that the notice itself refers to the services being rendered and received by the Appellant in USA. Since the entire services is rendered and received in USA, no part of the service is received in India. The provisions invoked pertain to the services provided by the service providers abroad and received by the service recipient in India, which by a deeming fiction is treated as services provided by such a service recipient and thus make liable to tax aforesaid provisions. The Appellant is in fact exporting goods and the service providers abroad provide these services in relation to such exported goods after their arrival in USA and at no stage are these services required for any activity of the Appellant in India. Therefore, to tax a service rendered abroad using the legal fiction of the import is contrary to Export Promotion Schemes. Ld. Cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ords and citations submitted. 11. The issues that arise for our determination are whether the demand of tax for the services rendered by the service providers in USA are exigible to tax at the hands of the appellant under the reverse charge mechanism and whether the income earned by letting out the windmills by the appellant is exigible to tax as renting of immovable property. 12. On the first issue, we find that it is an admitted position that the services provided to the appellant are rendered by the service providers in USA and are received and consumed in the said country. The activity of the service providers with respect to the services rendered to the appellant is also not in dispute as the SCN itself does not controvert the appellant's clarification that the service providers abroad cleared the goods from the Customs, transported from the port of arrival to the Warehouse, stored, packed and delivered to the intended customers of the Appellant in that country. However, while conceding that this was in the nature of complete logistics services rendered to the appellant, the proposal is to classify such services as Business Support Services, which is now disputed before ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 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: 5. The above Section has to be read along with the Taxation of Services (Provided from Outside India and Received in India) Rules 2006. Rule 17 reads as under:- "Rule 3 Taxable services provided from outside Indian and received in India. "Subject to section 66A of the Act, the taxable services provided from outside India and received in India shall, in relation to taxable services,- i. ........... ii. Specified in sub-clauses (a), (f), (h), (i), (i), (1), (m), (n), (o), (w), (x), (y), (z), (zb),....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... collects sale proceeds in India. But the legislature in its wisdom, has framed Rule 3(ii) to encourage exports and in turn foreign exchange remittances. We find force in the contention of the Ld. Advocate that the activity of the appellant being wholly performed outside India, is excluded from service tax liability as per Rule 3(ii) of the Taxation of Services (provided from outside India and received in India) Rules, 2006. Further, we note that on an identical set of facts this very Bench of the Tribunal in the case of M/s. Bnazrum Agro Export Pvt. Ltd. (supra) has held that such activity would not be exigible to service tax by virtue of Rule 3(ii) of the Rules. The relevant portion of the judgement is extracted below for the sake of convenience: "5. We find that the Ld. Advocate is correct in his assertion that since services have been wholly performed outside India, the activity will not be exigible to service tax by virtue of Rule 3 Taxation of Services (ii) of the (Provided from Outside India and Received in India) Rules, 2006. We find that the case laws relied upon fully support his assertion. Following the ratio already laid down, we find that the impugned order ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ises, including the precincts thereof, where in or in any part of which, excisable goods are manufactured or any manufacture process connected with the production of these goods is carried on. When the law of the land, as settled by the decision of the Hon'ble Apex Court in CCE Vs. Solaris Chemtech Ltd. 2007 (214) ELT 481 (SC), is that electricity is not an excisable item, and when electricity is something that is generated, we are unable to appreciate the contention of the Revenue that the windmill is to be treated as 'factory', as to our mind, in light of the aforesaid Apex Court decision, since electricity is not an excisable goods manufactured, the windmill would not come within the ambit of the term factory. 15. Furthermore, we see that the reasons for considering the windmill as an immovable property, stated in the Order in Original is that upon consideration of the definition of "immovable property" as defined in Clause 26 of Section 3 of the General Clause Act, such windmills would be covered under the expression immovable property. We find that citing the aforesaid definition of "immovable property" as given in the General Clauses Act, is an improvisation by the Adjudic....