TaxTMI 
TaxTMI 
2024 (1) TMI 1537
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....elopment'. The Appellant was working at three different places namely, (i) SDF B-13, 14 & 15, 3rd Floor, Noida Special Economic Zone, Dadri Road, Phase-II, Noida, (ii) Unit No.153 & 154, 1st Floor, SDF-V, Santacruz Electronics Export Processing Zone, SEZ Andheri (E), Mumbai and (iii) 702, 7th Floor Skylark Building, 60, Nehru Place, New Delhi and was holding centralized service tax registration No. AAACI7597RSD002 dated 12/05/2016. The Appellant was engaged in software development activities and was availing CENVAT credit under CENVAT Credit Rules, 2004 in respect of Service Tax paid on input service received by him. 3. The Officers of Central Tax, Audit Commissionerate, Noida had conducted audit of the records of the Appellant for the period from April, 2013 to June, 2017 and observed that Indus Valley Partners US (in short referred to as IVP US) has been engaged by Indus Valley Partners India( in short referred to as IVP India), i.e., the Appellant, to provide & execute Product Delivery Services to IVP India customers in US and such other additional services as may be mutually agreed (hereinafter in consolidation referred to as 'Product Delivery S....
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....e clients of the Appellant in US, and (ii) Business Auxiliary Service to the Appellant by way of rendering services to the clients of IVP India on behalf of IVP India. Further, as per clause (vi) of the definition 'Business Auxiliary Service' provided under sub-section (19) of section 65 of the Finance Act, 1994, the activity of provisioning of service on behalf of client fell under the category of 'Business Auxiliary Service'. 6. It was found that as per section 68(2) of the Finance Act, 1994 read with notification No.30/2012-ST dated 20/06/2012 and rule 2(d)(i)(G) of the Service Tax Rules, 1994, the Appellant was required to pay service tax on 'Business Auxiliary Service' provided by M/s IVP US to the Appellant under Reverse Charge Mechanism (RCM) for the period from April, 2013 to June, 2017 as service provider was located in foreign territory but it was noticed that no Service Tax was paid by the Appellant. 7. On the basis of above audit observation, Show Cause Notice dated 23.10.18 was issued to the Appellant for demand of Service Tax of Rs.35,49,28,587/- on the services carried out by IVP US for IVP India clients in US on behalf of the Appellant alongwith inter....
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....herefore, the place of provision of service in both the cases would be the United States of America and the United Kingdom, respectively. As the place of provision of service is itself outside the taxable territory of India, demanding service tax on the said services was not legally correct. 9. The Ld. Counsel for the Appellant vehemently refuted the classification of impugned services under 'Business Auxiliary Service'. He pleaded that 'intermediary' means, as per rule 2(f) of the POP Rules, 2012, a broker, an agent or any other person, by whatever name called, who arranges or facilitates a provision of a service (hereinafter called the 'main' service) or a supply of goods between two or more persons but does not include a person who provides the main service or supplies the goods on his account and services provided by IVP US/UK were intermediary services. In support his contention, he also placed reliance on the clarification issued on intermediary in 'An Education Guide ('Guidance Note')' on June 20, 2012 issued by the Central Board of Excise and Customs. He emphasized that where a service was capable of being classified under two or more categories, the more specific classi....
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....nt Company in countries outside India. As per Rule 5 of the Service tax (Place of Provision of Services) Rules, 2012, in case of service of accommodation in guest houses etc., the place of supply of such service shall be the place where the immovable property is located which in the instant matter happens to be a place outside India. Hence, no service tax was chargeable. The Ld. Counsel for the Appellant argued that no penalty was imposable under section 78 & 77 of the Finance Act, 1994 as the Appellant was apprising everything to the department by way of filing of ST-3 returns. He also pleaded the case on time barring issue. Principle of revenue neutrality was also cited. It was contended that the impugned order is not proper and not sustainable. 12. Ld. Departmental Representative contended that services rendered by IVP US/ IVP UK were classifiable under the category of Business Auxiliary Services and were chargeable to service tax under reverse charge mechanism. He reiterated that impugned OIO was proper and legal and maintainable. 13. Heard both sides and perused the appeal records. 14.1. We find that the demand of service tax was raised treating the services namely, i....
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....the omitted provision cannot be considered. In this context the decision of the Hon'ble Supreme Court in the case of Shiv Shakti Cooperative Society Vs Swaraj Developers & others, date of decision 17.04.2003, can be referred. The Apex Court has held as under:- "Section 6 of the General Clauses Act has no application because there is no substantive vested right available to a party seeking revision under Section 115 of the Code. In Kolhapur Canesugar Works Ltd. and another vs. Union of India and others (AIR 2000 SC 811), it was observed that if a provision of statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, there is no scope for granting it afterwards." In view of the above decision, it is not proper to take assistance of the omitted definition of Business Auxiliary Service for classification of services rendered by IVP US/UK on behalf of IVP India. 14.2. It was contended by the Appellant that the said services were intermediary services. It is found that 'Intermediary' was defined under rule 2(....
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.... alter the nature or value of the service, the supply of which he facilitates on behalf of his principal, although the principal may authorize the intermediary to negotiate a different price. Also, the principal must know the exact value at which the service is supplied (or obtained) on his behalf, and any discounts that the intermediary obtains must be passed back to the principal. Separation of value: The value of an intermediary's service is invariably identifiable from the main supply of service that he is arranging. It can be based on an agreed percentage of the sale or purchase price. Generally, the amount charged by an agent from his principal is referred to as "commission". Identity and title: The service provided by the intermediary on behalf of the principal is clearly identifiable. In accordance with the above guiding principles, services provided by the following persons will qualify as 'intermediary services':- i) Travel Agent (any mode of travel) ii) Tour Operator iii) Commission agent for a service [an agent for buying or selling of goods is excluded] iv) Recovery Agent Even in other cases, wherever a pro....
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....ully or partly, to sub-contractor. Such sub-contractors are carrying out the main supply of goods or services and provides the main service on his own account to the buyer on behalf of main supplier. Such services are not intermediary and part of main supply only. 14.3 Now we proceed to discuss the nature of services rendered in the present case. To begin with, we consider various clauses of the Agreement dated 21.03.16 entered in to between the Appellant and IVP US/UK. "a). IVP US has been engaged by IVP India to provide & execute Product Delivery Services to IVP India customers in US and such other additional services as may be mutually agreed (herein after in consolidation referred to as 'Product Delivery Services'). b). IVP US has requisite skilled employees who are capable of providing the Product Delivery Services. c). Subject to the terms and conditions set forth herein, the parties hereto agree that IVP US will allocate specific personnel/employees as may be required by IVP India from time to time to provide & execute Product delivery to IVP India clients in US. IVP US shall use its best efforts to support IVP India. d). The price whic....
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....ed between IVP India and its clients." A conjoint reading of the Agreement and its Note reveals that - i. The Appellant was engaged in software development services. He authorised his clients to use software on certain consideration. ii. The main service of the Appellant was, therefore, authorisation of use of software developed by him. iii. While selling authorisation of use of software, the Appellant was also agreed upon to provide training to the staff of clients, installation, implementation and rectification defects if any surfaced during use of the software to his clients. The aforesaid services were to be undertaken only after sale of the main service i.e., sale of authorisation of use of software. iv. It shows that after sale services were also provided by the Appellant to its clients. v. The Appellant entered into the said agreement with IVP US/UK to provide after sale service to the clients of the Appellant in USA and UK. vi. Sale of authorisation of use software was main service of the Appellant and training of staff, installation, implementation and rectification of defects services were after sale of main service....
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....rty' was a separate service and was not covered under Business Auxiliary service by any stretch of imagination. The definition of 'renting' is provided under section 65B of the Finance Act, 1994 as below:- "(41) "renting" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property;" The above facts clearly show that renting of immovable property was a separate service, not covered under Business Auxiliary Service. 16. It is seen that demand was raised and subsequently confirmed under reverse charge mechanism treating the place of provision of services within taxable territory. Under the Place of Provisions of Services Rules, 2012 (POP Rules), place of provisions of services were specified for different services. Rule 3 of the POP Rules specifies general rule that the place of provision of a service would be place of service recipient. Rule 4 provides place of provision of performance-based services. Rule 5 ....
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.... 17. The Ld. Pr. Commissioner while confirming demand had given his findings as under:- "5.3.7 I find that the services, i.e. installation, implementation, maintenance and other ancillary services performed by IVP US and IVP UK to the clients of IVP India on behalf of IVP India were main services, i.e., the services of installation and maintenance services etc. As such IVP US has performed the sais services (main service) and thus services IVP US are not intermediary services as defined under rule 2(f) of the Place of Provisions of Services Rules,2012 as the definition of intermediary excludes the person who provides main service". --------------------------------------- "5.4.2 I find that the IVP US has provided the installation, implementation of software and on other going services etc to the vendors of the IVP India in USA. I find that IVP India had provided software development service to their clients in USA. As per the agreement entered in to with their clients read with model agreement in the form of Template. IVP India had sold software licence for specific fee and installation & implementation of software were no covered within scope of ....
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....hequer in that case. It is a case of revenue neutrality. We find that the issue of the applicability of revenue neutrality in the circumstances of charging service tax under reverse charge mechanism has been settled in catena of judgments. In the case of Jet Airways India Ltd. [2016-TIOL-2072-CESTATMUM], the Tribunal considered issue of revenue neutrality where service tax was required to be paid under reverse charge mechanism as service provider was a foreign based firm. The Tribunal held that as the Appellant could have availed CENVAT credit of the service tax paid on reverse charge mechanism, hence, a revenue neutral situation arises wherein Appellant pays the tax and takes the credit and accordingly the tax demand, interest thereon and penalties were set aside. In the case of Jain Irrigation System Ltd. [2015 (40) S.T.R. 572 (T)] the Tribunal holds that revenue neutral situation comes about when credit is available to the assessee. In the case of Coca-Cola India Pvt. Ltd. [2007 (213) E.L.T. 490 (S.C.)] the Hon'ble Supreme Court accepted the stand that the duty payable in respect of beverage basis/concentrates is modvatable. Since the duty payable is modvatable, there i....