2023 (5) TMI 1027 - AT - Service Tax

Levy of Service Tax - Business Support Service (BSS) - value added services provided by the overseas entity - appellant is the recipient of such service in India - commission charged from the appellant - reverse charge mechanism.

Value added services - HELD THAT:- Apart from supplying the rough diamonds to the appellants, the overseas entity had supplied the value added service to the appellant, which were levied with the service tax demand by the department confirming those services to fall under the scope and ambit of the taxable service namely Business Support Service. The VAS services include supply of planning tools services which include continuity of supply, Intention to offer, Consistency of Boxes, sight holder Extranet services, SOC integrity (3rd party verification) provision of key Account Manager provided by them, as also Business sustainability services like consumer demand, consumer confidence, Best practice principles (BPP) (given at no additional cost along with supply of planning of tools services) which include creating consumer confidence for natural diamond, certification process to ensure that the diamond are mined from conflict-free zones and are not involved into illegal or illegitimate activities.

The value added services provided by the overseas entity are part and parcel of the rough diamond supplied by them and considering the commission amount on such services, the Customs Department had assessed the bills of entry by including such value in the transaction value for the purpose of levy of Customs duty. It is not the case of Revenue that the value added services were otherwise can be arranged or provided by the appellant in furtherance to their business activities; rather availment of the said services were condition precedent, meaning thereby that, those services have to be compulsorily availed from the overseas entity and there is no choice for not availing those services.

From the clarification in D.O.F. No.334/4/2006-TRU dated 28.02.2006 issued by the TRU, it is observed that the intention of the legislature was to collect service tax on the outsourced services only - In the present case, since for provision of the value added services, the appellant had not outsourced services to the overseas entity, it cannot be said that such services provided by the overseas entity should be taxed under the category of Business Support Service. Thus, the confirmation of the service tax demand in the adjudication order on Business Support Service will not stand in judicial scrutiny.

Business Auxiliary Services provided by M/s. H Goldie & Co. Ltd. to the appellant - HELD THAT:- In an identical situation, Tribunal has dismissed the appeal in favour of the importer holding that the activity provided as a commission agent should fall under the category of Business Auxiliary Service. Further, the appellant has also concedes the fact that it is not contesting the demand confirmed under Business Auxiliary Service. Therefore, the appellant is liable to pay service tax confirmed in the adjudication order with regard to that category of service. Hence, there are no infirmity in the impugned order insofar as it has confirmed the adjudged demands under the Business Auxiliary Service.

The matter should go back to the original authority for the limited purpose of quantifying the service tax demand with regard to the Business Auxiliary Service, which should be paid for the units by the appellant - Appeal allowed in part.