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2022 (2) TMI 832 - CESTAT HYDERABADLiability of service tax - RCM - contention of the appellant that service tax was payable in the present case by RIL as the service recipient of the services provided by Aker Malaysia under the reverse charge mechanism and not by treating the appellant as a service provider was rejected - applicability of reverse charge mechanism for the period prior to 01.07.2012, if the foreign service provider had established a ‘fixed establishment‘ in India from which the service was provided - location of the service provider - Place of Provision of Service Rules was India, since the Project Office in India was the establishment most directly concerned with the provision of service - period from February 2010 to April 2014. HELD THAT:- The Principal Commissioner has held that the location of the service provider would be India in view of clause (iii) of rule 2(h)(b). According to the Principal Commissioner India was the establishment ‘most directly concerned with the provision of the service‘. This conclusion is factually not correct. The contract would show that Aker Malaysia was the only establishment concerned with the provision of service and Aker India had no connection with the provision of services. The true test for determining this issue would be who, amongst the various establishments involved in the execution of a service contract, would be liable to be sued for any breach of the contract. Aker India did not even exist when the contract dated 15.09.2009 was executed between Aker Malaysia and RIL and Aker India was not even a party to the said contract. Service provider is one who is contractually obliged to render services - it may be useful to refer to the decision of the Delhi High Court in VERIZON COMMUNICATION INDIA PVT. LTD. VERSUS ASSISTANT COMMISSIONER, SERVICE TAX, DELHI III, DIVISION-XIV & ANR. [2017 (9) TMI 632 - DELHI HIGH COURT], wherein it was held that the identity of the service recipient has to be decided with reference to the contract concerned. Learned counsel for the appellant has submitted that Explanation 4 to section 65B (44) of the Finance Act has to be read together with Explanation 3(b) and if so read, the conclusion would be that though a representational office in any other country is an establishment of the person whom the said office represents (by virtue of Explanation 4), such a representational office is considered as a person distinct and separate from the other establishments of the same person located elsewhere [(by virtue of Explanation 3(b)] - the submission deserves to be accepted as the position that would emerge would be the same as that from the erstwhile section 66A (2), which dealt with different establishments located in different countries as separate persons for the purpose of reverse charge mechanism. A complete perusal of the terms of the contract would show that setting up a ‘support base‘ at Kakinada was not the only or the main element of service that was required to be provided to RIL. Infact Exhibit A talks of 19 deliverables. The contract envisages services required to be provided to RIL, both at the project stage at which stage a support base was required to be set up as well as an ongoing basis when the oil and gas production was to commence. The reference to ‘support base‘ is to a repair yard where tools, spares, parts and testing equipments have to be kept and maintained. It is not in reference to a ‘project office‘ or any ‘fixed establishment‘. It would not be appropriate to read the word ‘established‘ as ‘establishment‘ - the inevitable conclusion that emerges from the above discussion is that RIL, as the service recipient, was required to discharge service tax liability on a reverse charge mechanism on the services provided by Aker Malaysia to RIL. The order passed by the Principal Commissioner is, accordingly, set aside - appeal allowed - decided in favor of appellant.
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