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2019 (1) TMI 1113 - AT - Service TaxReverse charge mechanism - intellectual property right services - business auxiliary service - demand of tax on differential rate of tax - penalty - Held that:- The empowerment of the Central Government to notify the rate of exchange for the purpose of computation of assessable value in relation to chargeability of tax under section 66 A of Finance Act, 1994 came into effect much after the period of dispute. Consequently, in the absence of a legal mechanism for alternate computation, the exchange rate at which the payment was remitted to the overseas entity alone could be applied. The demand of tax on the differential rate of exchange does not sustain and is set aside. Furthermore, it is apparent from the scheme of ‘deemed provider of service’ in section 66A of Finance Act, 1994 and Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 that the entitlement to CENVAT credit of tax so paid eliminates the attribution of motive or conduct that are the ingredients for imposition of penalty under section 78 of Finance Act, 1994. The residuary provision for imposing the figment of import on transactions enumerated in section 65(105) of Finance Act, 1994 does not extend to ‘intellectual property rights’, unique as they are and not amenable, by comparison with procurement of such property from within the country, to countervailing. The said Rules have an inbuilt provision for exemption of all services that do not fall within the ambit of import of service by reference to section 93 of Finance Act, 1994 excluding this particular activity thereby from the ambit of tax. Penalties set aside - appeal allowed to the limited extent of the differential tax arising from the application of alternate rate of exchange.
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