TaxTMI 
TaxTMI 
2026 (9) TMI 1843
X X X X Extracts X X X X
X X X X Extracts X X X X
....oreign currency expenses for procuring various services from the non-taxable territory (i.e. suppliers located outside India). All such foreign currency expenses were duly disclosed in the ST 3 returns and deductions/abatement were claimed with respect to those specified services which were not covered under Rule 3 of the POPS Rules, but covered under Rule 4, Rule 9 and Rule 10 of the POPS Rules. 2.1 Based on scrutiny of the ST 3 returns filed by the Assessee, as a service recipient, for the relevant period, SCN dated 31 August 2018 was issued demanding service tax on reverse charge basis in terms of Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012 -ST dated 20 June 2012 ("reverse charge notification"), on the select foreign currency payments, for which deductions were claimed by the assessee by purportedly applying Rule 3 of the POPS Rules to assume that the specified underlying services were provided in the taxable territory. At this juncture, it would be pertinent to note that similar demand was raised under the positive list regime, covering the period 2007-08 to 2011-12 by invoking the then default Rule 3(iii) of the Taxation of Services (Provided f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atabase/Information Service 9,55,296 Rule 3 of the POPS Rules 9,55,296 Rule 9 of the POPS Rules Annexure 14/Pg. 742789/Reply to SCN Pg. 255-264/Compilation 8. Transport of Goods by Air 9,54,157 Rule 3 of the POPS Rules 9,54,157 Rule 10 of the POPS Rules Annexure 15/Pg 790851/Reply to SCN Pg. 265-280/Compilation 9. Technical Testing and Analysis Service 6,60,098 Rule 3 of the POPS Rules 6,60,098 Rule 4 of the POPS Rules Annexure 16/852-898/Reply to SCN Pg. 281-286/Compilation 10. Business Support Service 3,11,347 Rule 3 of the POPS Rules 3,11,347 Rule 4 of the POPS Rules Annexure 17/899-902/Reply to SCN Pg 287-290/Compilation 11. Other Taxable Service 3,09,827 Rule 3 of the POPS Rules 3,09,827 Rule 4 of the POPS Rules Annexure 18/Pg 903950/Reply to SCN Pg 291-301/Compilation 12. Erection, Commissioning and Installation Service 1,00,679 Rule 3 of the POPS Rules 1,00,679 Rule 4 of the POPS Rules Annexure 19/Pg 951953/Reply to SCN Pg. 302-304/Compilation 13. Commercial Training or Coaching Service 57,336 Rule 3 of the POPS Rules 57,336 Rule 4 of the POPS Rules Annexure 20/Pg 954957/Reply ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the demand. (ii) Further, the burden to prove taxability is upon the Revenue [Refer -Commissioner of Customs (Import), Mumbai Vs Dilip Kumar & C0 - 2018 (361) E.L.T. 577]. Section 66B of the Finance Act states that service tax is levied on the services which are provided or agreed to be provided in the taxable territory. Section 68(2) read with the reverse charge notification further states that the tax shall be paid on reverse charge by the recipient of services when the same are provided by a person located in the non-taxable territory to a person located in the taxable territory. In order to examine whether a service has been provided in the taxable territory or not one must have recourse to the POPS Rules. Rule 3 of the POPS Rules is a default/general Rule that is applicable when a specified service does not fall within any of the other Rules i.e., Rule 4 to Rule 12. In the instant case, Revenue has conveniently assumed applicability of Rule 3 without adducing any reasons to dispel the claim of the Noticee/Assessee as made in the ST 3 returns regarding the applicability of Rule 4, Rule 9 and Rule 10. (iii) In so far as the contention of the Department with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l business of transportation of crude oil. In addition to deploying its own fleet of ships, situations also used to arise, when due to unavailability of Assessee's own ships, Assessee used to hire ships on spot charter basis, from vendors overseas to perform the voyages. On account of delay in loading/unloading of such ships, the assessee was required to pay demurrage charges. The demand of Rs.1,26,16,689 has been computed by Ld Adjudicating Authority on such demurrage payments of Rs.8,57,75,203 by considering the same to be towards transportation of goods by coastal shipping which was covered in the negative list upto May 2016 and was removed thereafter, despite the categorical submissions by the Assessee that the said payments were towards demurrage : Month/Period Amount Paid (in Rs) Rate of Service Tax (including Cess) Service Tax (including Cess) June 2016 1,44,99,348 14.5% 21,02,405 July 2016 94,08,964 14.5% 13,64,300 August 2016 95,58,194 14.5% 13,85,938 September 2016 1,64,51,853 14.5% 23,85,519 October 2016 to March 2017 3,58,56,844 15% 53,78,527 4.2 It is further submitted that demurrage charges hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... service tax of Rs.144,27,58,625/-. The AA has dropped the demand of service tax of Rs.143,01,41,936/-(Rs. 106,57,36,695/- + Rs.28,31,47,388/- + Rs.4,07,35,941/- + Rs.2,35,97,348/- + Rs.95,18,574/- + Rs.40,25,810/- Rs.9,55,296/- + Rs.9,54,157/- + Rs.6,60,098/- + Rs.3,11,347/- + Rs.3,09,827/- + Rs.1,00,679/- + Rs.57,336/- + Rs.25,878/- + Rs.5,562/-) payable (under RCM) on taxable services received in respect of services mentioned at Sl. No. 1 to 15 of the above table respectively during October 2012 to June' 2017 along with applicable interest and applicable penalty u/S 78 of the said Act and while doing so, he has not recorded his findings thoroughly. There is nothing to show how he reconciled the payments made by the noticee as recipient of taxable services or otherwise during the material period with relevant invoices/bills, work orders/agreements, payment particulars and other supporting documents. In short, he has not passed a speaking order. (ii) It is observed that the ld.Adjudicating Authority considered only the submissions made by the noticee and he strictly confined himself only to the respective service wise submissions made by the notice and did not evaluat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the said Act and how he ascertained that goods in conformity with Sec 65B(25) of the said Act were transported during the disputed period, are not understood. (iv) After examination of all the relevant documentary evidences of the noticee, no analysis of the same with cogent reason made by the AA in support of his decision, is noticed in his findings. No detailed examination of all the payments made towards shipping services was also made by the AA in support of his decision in his findings. In absence of any examination of all the relevant invoices along with payment particulars by the AA, it could also not ruled out any part of transaction involved coastal shipping, i.e., transport of goods from one Indian port to other Indian port, which was out of the ambit of Sec 66D(p) (ii) of the said Act during the period from October 2012 to May 2016. In the instant issue, after examination of all the relevant documentary evidences, the AA should have analyse the same to ascertain the proper facts of the case in support of the decision regarding drop of demand of service tax of Rs.106,57,36,695/- but he had not done so. By not doing so, the AA's decision based only on the no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Determination of Value) Rules, 2006 as well as the meaning of pure agent as per Explanation 1 of the said Rule 5(2) were fulfilled or not, are not understood. After examination of the relevant documentary evidences of the noticee, no fact based analysis of the said evidences with cogent reasons made by the AA in his findings is noticed. In the instant issue, after examination of all the relevant documentary evidences, the AA should have analyse the same to ascertain the proper facts of the case in support of the decision regarding drop of demand of service tax of Rs.28,31,47,388/- but he had not done so. By not doing so, the AA's decision based only on the noticee's submissions, is not sustainable. In absence of any such reflection of document based examination in the discussion & finding as made by the AA, the decision made by the AA in respect of drop of service tax demand of Rs.28,31,47,388/- seems to be non- speaking and accordingly not legal and proper. (vi) In respect of Maintenance/Repair service, from the discussion & finding, it is seen that the AA dropped the demand of service tax by concluding that the service provider was located in a non-taxable territ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....: how he ascertained that the shipbrokers acted as intermediaries as defined u/R 2(f) of the POPS Rule; how he ascertained the location of the service provider who provided the service as well as the location of provision of actual performance of service in respect of actual receipt of service, both were in the non-taxable territory in respect of the subject service and how he ascertained the subject services were in conformity with Rule 9(c) of the POPS Rule, are not understood. (ix) The finding made by the AA in the subject issue, is clearly devoid of any examination of related proper evidences. In the instant issue, after examination of all the relevant documentary evidences, the AA should have analyse the same to ascertain the proper facts of the case with cogent reasons in support of the decision regarding drop of demand of service tax of Rs. 2,35,97,348/- but he had not done so. By not doing so, the AA's decision based only on the notice's submissions, is not sustainable. In absence of any such reflection of document based examination in the discussion & finding as made by the AA, the decision made by the AA in respect of drop of service tax demand of Rs.2,35,97,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd of Rs.95,18,574/- Rs.40,25,810/- Rs.6,60,098/, Rs 3,11,347/ Rs.1,00,679/- Rs. 25,878/- and Rs.5,562/- in respect of technical inspection & certification service, security/detective agency service, technical testing & analysis service, business support service, installation service, information technology software service and general Insurance service respectively seems to non-speaking and accordingly not proper. (xii) In respect of Other taxable service/Information service, from the discussion & funding, it is seen that based only on the noticee's submission, the AA dropped the demand of service tax by concluding that the service provider was located in a non-taxable territory and the place of provision of services in respect of the above service was also non-taxable territory but in support of his decision, there was no document based examination of the relevant documents in the AA's finding. There is no reflection of examining any related relevant documents such as invoices, agreements (if any), payment particulars etc., if submitted by the noticee in their support. In absence of any such examination: how he ascertained the location of the service provider - w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d how he ascertained the subject services were in conformity with Rule 10 of the POPS Rule, are not understood (xiv) After examination of all the relevant documentary evidences, the AA should have analyse the same to ascertain the proper facts of the case with cogent reasons in support of the decision regarding drop of Demand of service tax but he had not done so. By not doing so, the AA's decision based only on the noticee's submissions, is not sustainable and therefore, in absence of any such reflection of document based examination in the discussion & finding as made by the AA, the decision made by the AA in respect of drop of service tax demand of Rs. 9,54,157/- seems to non-speaking and accordingly not proper. (xv) In respect of Other taxable service & Commercial training & coaching service from the discussion & finding, it is seen that based only on the noticee's submission, the AA dropped the demand of service tax by concluding that the service providers were located in non-taxable territory and the places of provision of services in respect of the above services were also non-taxable territory but in support of his decision, not a single docume....
X X X X Extracts X X X X
X X X X Extracts X X X X
....how-cause notice is based on scrutiny of ST-3 Returns and the on the basis of audit conducted. As all the documents relevant to the claim of the appellant, were with the Revenue during the course of audit itself and the assessee has claimed deductions in terms of Rule 4,9 & 10 of POPS Rules, 2012, which is evident from their ST-3 Returns. In that circumstances, we are of the view that the extended period of limitation is not invokable. 9. Admittedly, part of the demand in this case has been proposed by way of invoking extended period of limitation as for the period October, 2012 to June, 2017, a show-cause notice has been issued on 31.08.2018 by way of invoking extended period of limitation. 10. We further take note of the fact that at the time of issuance of show-cause notice, it is alleged by the Department that Rule 3 of POPS Rules, is applicable to the case (whereas the assessee has claimed the deductions under Rule 4,9 & 10 of POPS Rules), which not exempted while issuing show-cause notice. Rule 4 of POPS is applicable for place of provision of performance-based services and Rule 9 is for place of provision of specified services and Rule 10 is for place of provision of g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the assessee and not paid the service tax by claiming the deductions under Rule 4,9 & 10 of POPS Rules, 2012, separately and thereafter, came to the conclusion that the assessee is entitled to claim the deductions thereof in Paragraphs 5.14 to 5.31 of the adjudication order, wherein he has came to the following decisions : "In view of the above discussion and findings, I arrive at the conclusion that the said assessee - (a) have availed improper deduction/abatement by wrongly quoting Rule 4, 9 & 10 of Place of Provision of Services Rules, 2012 read with Sections 66C of the Finance Act, 1994 and Notification No.28/2012-Service Tax dated 20.06.2012, made effective from 01.07.2012 and have contravened the provisions of Section 68(2) of the Finance Act, 1994 read with Notification no 30/2012-ST dtd 20.06.12 made effective from 01.07.2012 and Section 70 of the Finance Act, 1994 read with Rule 6 & 7 Service Tax Rules, 1994 in as much as the said assessee have not paid Service Tax to the tune of Rs. 1,26,16,689/- (Rupees one crore twenty six lakh sixteen thousand six hundred and eighty nine) only including Education Cess, & Secondary Higher Education Cess, Swach Bh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f interest under Section 75 of the Finance Act, 1994 read with Section 174(2) of the CGST Act, 2017. 5.33 The said assessee have claimed deduction/abatement/exemption of certain amount from the purview of tax by quoting Rule 4, 9 & 10 of POPS Rule which indicates that they were very much aware of law regarding the concept of 'Reverse Charge Mechanism' read with Notfn no 30/2012-ST dtd 20.06.12 effective from 01.07.12. If the provider of Service has no office/establishment in India (taxable territory), the recipient of service is liable to pay the tax under 'Reverse Charge Mechanism' in respect of transportation of goods by coastal shipping from the period of June, 2016 onwards. The said assessee was well aware that they were receiving services from non-taxable territory but have resorted to wilful mis-statement by taking the shelter of Rule 4, 9 & 10 of POPS Rule with clear cut intention to evade the liability of Tax. The matter came to the notice of the department during the course of enquiry and verification of the records of the said assessee. Had the department not conducted such enquiry, the non-payment of service tax by the said assessee would have re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Nizam Sugar Factory Vs. Collector of Central Excise, AP reported in 2008 (9) STR 314 (SC). Therefore, the extended period of limitation is not sustainable. 15. With regard to Revenue's Appeal, we find that the Revenue has blindly concluded that for the services availed by the assessee, the place of provision of service is the location of the service recipient and alleged that the assessee has availed all the services. It is thus the Revenue's contention that the assessee shall be liable to pay service tax under reverse charge mechanism in respect of the said services. 16. However, we find that the place of provision of the said services is the place of provision of performance based services, the place of provision of specified services and the place of provision of goods transportation services, for which reason the assessee claimed for deduction under Rules 4, 9 & 10 of POPS Rules, 2012. 17. We find that the ld. Adjudicating authority has rightly examined the issue and held that the assessee is entitled for such deductions in terms of Rules 4, 9 & 10 of POPS Rules, 2012 and therefore, dropped the demand of Rs.143,01,41,936/- pertaining to the period from October, 2012....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the contract does in return to the other party doing its part of the contract and 'compensation under the contract' which is a penalty for breach of contract by either frustrating the contract through non-performance or by not performing as per the conditions in it. This compensation can take the form of unliquidated damages where the Court awards the compensation or liquidated damages where the compensation for breach of contract or its conditions is pre-decided and incorporated in it. The liquidated damages are not the purpose of the contract but are in terrorem to provide a strong incentive against breaching its conditions. 11. We also find that the Central Board of Excise and Customs has also clarified this aspect as far as the container detention charges are concerned, as follows : Circular No. 121/2/2010-ST F. No. 332/29/2009-TRU Government of India Ministry of Finance Department of Revenue Central Board of Excise & Customs (Tax Research Unit) ***** New Delhi-110001 dated the 26th April 2010. To Director General of Service Tax, Mumbai Director General of Central Excise Intelligence, Delhi Chief Commissioner....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee. 23. In view of the above, we set aside the impugned order qua confirmation of demand of Rs.1,26,16,689/- against the assessee and affirmed the order of dropping of the demand of Rs.143,01,41,936/. 24. In the result, the appeal filed by the Revenue is dismissed and the appeal filed by the assessee is allowed with consequential relief, if any. (Pronounced in the open Court on 25.09.2026) ============= Document 1Pace 9 No. Paid to Date of Issuance of Demurrage Invoice Date of Issuance of Freight Invoice Date Paid Amount In USD 01 03 2-07 08-10 11-43 12-15 . :6-19 3323 24-25 26-29 30-31 VS Pool Inc. 15-Jun-16 19-Aup-15 15-Jun-16 1,19,937 Blue Fin Tankers Inc. 24-Mar-16 13-Oct-15 01-Jul-16 2,22,002 Frontline Shipping Limited 06-Apr-16 15-Jan-16 11-Aug-16 1,42,942 ISS International FZE 30-Apr-16 02-Nov-15 21-Sep-16 11,456 ISS International FZE 30-Apr-16 16-Nov-15 21-Sep-16 1,53,623 ISS International FZE 15-Jan-16 17-Nov-15 21-Sep-16 34,066 ISS International FZE 20-Sep-16 13-Jan-16 21-Sep-16 46,130 Angelina Navigation Inc. 07-Jun-16 22-Dec-15 04-Nov-16 34,371 Romeo Investments Inc. 31-May-16 10-Feb-16 28-Nov-16 5,320 Marathon Navigation Co 21-Nov-16....
X X X X Extracts X X X X
X X X X Extracts X X X X
....01 0% NOR lendered. 100% NOR+6. Time starts. 00:01 Tuun Working to 0, Showde berth, Time stops Od 03, 15 02:42 0% Stimme amco Crude Oil Terminal, Time resumas 11:00 100% Hoses connected. 12:15 Commenced loading. 03:35 100% Completed loading. 04:35 100% Hose(s) disconnected, Time stops .- 3 D 15 H 18 M Time used New Mangalore Discharge Oct 12; 15 10:42 0% NOR Effective 18:42 100% NOR+6. Time starts. Oct 19, 15 06:12 0% Anchor up. Time stops. 09:24 100% All fast SBM, Time resume 10-24 100% Hoses connected. 11-24 Commenced 11:24 100% Completed discharging. Oct 20, 15 19:00 100% (s) disconnected. Time stops. 7 D 23 H 54 M Time used Recap Yanbu 3 D 15 H 16 M New Mangalore 7 D 23 H 54 M () Time Used 11 D 15 H 10 M Time Allowed 3 D 12 H 00 M 30 12700ML Excess Time 8 D 03 H 10 M = 8.13194 days Rate(PDPR): USD 28,000.00 Time Cost: USD 227.694.44 Address (2.5%); USD 5,692.36 Net Damurrags: USD 222,002.08 TOTAL DUE: USD 272.002.08 Please remit the above amount to: Intermediary Bank (Required): Bank of New York Mellon, New York ABA 021000018 Swift Code IRVTUS3N Beneficiary Bank: DNB Bank ASA, New York Blue Fin Tankers Inc Account N....