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2024 (5) TMI 847 - CESTAT CHANDIGARHNon-payment of service tax - certain reimbursements made to the foreign entities for the services received under Reverse Charge Mechanism - Classification of services - Royalty paid by Baxter India to Baxter Healthcare Inc., USA - classifiable under 'Franchise Services' or under 'Intellectual Property Services'? - Non-payment of service tax on networking charges and technical services. Non-payment of service tax - certain reimbursements made to the foreign entities for the services received under Reverse Charge Mechanism - HELD THAT:- The appellant is rendering services to their overseas entities. Though, the services are performed in India, the beneficiary of the services is abroad and the payment for the same is coming to the appellants along with the reimbursed expenses; therefore, in view of the Circular No.111/05/2009-ST dated February 04, 2009, the services qualify to be export of services in view of the Export of Service Rules as the service is used outside India. The Tribunal has held similarly in the case of CCE & ST Vs Glaxo SmithKline Pvt. Ltd. [2023 (10) TMI 998 - CESTAT CHANDIGARH] and Arcelor Mittal Stainless India Pvt. Ltd. [2023 (8) TMI 107 - CESTAT MUMBAI-LB]. Classification of services - Royalty paid by Baxter India to Baxter Healthcare Inc., USA - classifiable under 'Franchise Services' or under 'Intellectual Property Services'? - HELD THAT:- The activity of the appellants as seen from the Agreement is not in the nature of Management Consultancy Services; though, at some places, the word “Advice” is used; on going through the terms of the Agreement, it will be clear that this is in the nature of giving or passing on of information rather than giving a management advice. It is found that the appellants are providing various information which is available in India to M/s Baxter, Singapore. The contentions of the appellants are correct. Moreover, as contended by the appellant, classification of service does not matter as long as they are exported. There is no such averment on the part of the Revenue that the services are not exported - It is clear from the Agreement that it is a license to use the ‘Intellectual Property Rights’ but not a ‘Franchise Agreement’. There is no mention of grant of Representational Right so as to fall under the category of ‘Franchise’. Therefore, the Department has not made out any on this issue also. Non-payment of service tax on networking charges and technical services - HELD THAT:- The appellant submits that service tax on the Reverse Charge Mechanism is not payable prior to 18.04.2006. It is found that the submission is acceptable as per the ratio of the judgment in Indian National Ship Owner’s Association and CST Delhi v. Sojitz Corporation [2022 (11) TMI 48 - SUPREME COURT]. Similarly, the appellant’s plea on the non-payment of service tax on reimbursement made by the appellant for certain receipt of services is acceptable. The appellant submits that these services are performance-based services and are performed outside India; the expenditure incurred by them in holding medical conferences abroad and attended by Indian doctors is reimbursed by their overseas entities - the learned Commissioner takes a long-drawn argument that the doctors after attending the conference come back to India and products whose quality has been tested abroad by the doctors are sold in India and therefore the same should form part of the assessable value. This conclusion is not agreed upon for the reason that service tax is not on expenses but is on that portion of the expenses which are paid for the services received. The impugned order is not sustainable - appeal allowed.
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