2025 (6) TMI 1965 - AT - Service Tax

Levy of service tax - Goods Transport Agency (GTA) services - reimbursement of expenses - service rendered to unit of SEZ services exported outside India - profit/revenue sharing with the sister concerns located abroad - export of service - HELD THAT - The appellants did not participate in the adjudication proceedings before the original authority by way of submitting various documents to convince their case that they were not liable to pay service tax on the services provided by them. Since verification of documentary evidences can be done at original stage the matter should go back to the original authority for a fresh fact finding with regard to the documents already submitted by the appellant and those to be submitted at the time of de novo adjudication proceedings. The submissions made by the appellants recorded herein should also be considered by the original authority at the time of passing of the de novo adjudication order. Appeal allowed by way of remand.

Summary

The core legal questions considered by the Tribunal in these appeals are:

• Whether the appellants are liable to pay service tax under the category of Goods Transport Agency (GTA) services when the services were supplied to corporate bodies, and specifically, whether the liability to pay service tax vests with the corporate recipients as per Rule 2(1)(d)(v) of the Service Tax Rules, 2004.
• Whether reimbursement of expenses received by the appellants from service recipients should be included in the gross value for service tax computation under Section 67 of the Finance Act, 1994.
• Whether services rendered to units located in Special Economic Zones (SEZs) are liable to service tax, considering the SEZ Act and Rules, and whether those provisions override the Central Legislation on service tax.
• Whether services exported outside India by the appellants qualify as export of service and are thus exempt from service tax liability.
• Whether the appellants' failure to cooperate and submit documentary evidence during adjudication proceedings affects the confirmation of service tax demands.

Issue-wise Detailed Analysis:

1. Liability for Service Tax on GTA Services Supplied to Corporate Bodies

The appellants contended that under sub-clause (v) of Rule 2(1)(d) of the Service Tax Rules, 2004, the liability to pay service tax on GTA services lies with the corporate bodies who receive such services, not with the service providers. This argument challenges the original authority's confirmation of service tax demand on the appellants for GTA services.

The Tribunal examined the legal framework, which clearly stipulates that where GTA services are provided to a corporate body, the recipient is liable to discharge the service tax. This principle is well-established and aligns with the statutory provisions under the Service Tax Rules. The appellants' position is supported by this legal framework.

However, the Tribunal noted that the original authority confirmed the demand without adequately considering the appellants' submissions and documentary evidence. Since verification of such evidence is crucial, the Tribunal found it appropriate to remit the matter for fresh adjudication, allowing the appellants to substantiate their claim that the liability rests with the corporate recipients.

2. Inclusion of Reimbursement Amounts in Gross Value for Service Tax

The appellants argued that mere reimbursement of expenses should not be included in the gross value for service tax computation under Section 67 of the Finance Act, 1994. They relied on the Supreme Court judgment in Union of India & Another Vs. Intercontinental Consultants and Technocrats Pvt. Ltd., which held that reimbursements do not constitute consideration for services and hence should not be taxed.

The Tribunal recognized the binding nature of the Supreme Court ruling and acknowledged that reimbursements, when not constituting consideration, ought not to be added to the taxable value. Nonetheless, since the original authority did not fully consider this legal precedent and the appellants' documentary evidence, the Tribunal directed a fresh adjudication to properly apply the law to the facts.

3. Taxability of Services Rendered to SEZ Units

The appellants contended that services supplied to SEZ units or developers are exempt from service tax as per the SEZ Act and Rules, which prevail over other Central Legislation. They supported their contention by citing several Tribunal orders, including decisions in Accenture Solutions Pvt. Ltd., Intas Pharma Ltd., Wabco India Ltd., M/s DLF Assets Pvt. Ltd., Makers Mart, Wardha Power Co. Ltd., and Global Stones Pvt. Ltd.

The Tribunal acknowledged the appellants' reliance on these precedents, which establish that SEZ Act provisions exempt services rendered to SEZ units from service tax liability. The Tribunal noted that this exemption is a settled position and should be considered during adjudication. However, as the original authority did not adequately evaluate the applicability of these precedents and the appellants' submissions, the matter was remanded for re-examination.

4. Export of Services and Liability for Service Tax

The appellants asserted that services exported outside India qualify as export of service and are therefore not liable to service tax. This contention aligns with the general principle that export of services is exempt from service tax under the Finance Act, subject to fulfillment of prescribed conditions.

The Tribunal noted the appellants' argument but found that the original authority confirmed demands without conducting a detailed inquiry into whether the conditions for export of service exemption were met. Given the absence of proper fact-finding and verification of documents, the Tribunal directed a fresh adjudication to determine the applicability of export of service exemption.

5. Non-Cooperation and Failure to Submit Documentary Evidence

The Revenue contended that the appellants failed to cooperate and submit necessary documents during adjudication, justifying confirmation of demands and seeking remand for proper fact-finding. The appellants, however, submitted documents at the appellate stage and relied on them to contest the demands.

The Tribunal examined the record and found that the appellants did not adequately participate in the original adjudication proceedings and failed to submit crucial evidence in a timely manner. Nevertheless, the Tribunal emphasized that verification of documentary evidence is essential at the original stage and that the appellants should be given an opportunity to present their case fully.

Therefore, the Tribunal remanded the matter to the original authority for de novo adjudication, directing that all documents submitted by the appellants, along with their written submissions and judicial precedents relied upon, be considered. The Tribunal also mandated that the appellants be granted reasonable opportunity for personal hearing, cautioning against unnecessary adjournments to avoid undue delay.

Significant Holdings:

The Tribunal held:

"The matter should go back to the original authority for a fresh fact finding with regard to the documents already submitted by the appellant and those to be submitted at the time of de novo adjudication proceedings. The submissions made by the appellants recorded herein should also be considered by the original authority at the time of passing of the de novo adjudication order. Any written submissions/judgments relied upon by the appellants at the time of original proceedings should also be considered for passing of a proper and justified adjudication order."

This establishes the principle that adjudication must be based on a thorough examination of all relevant evidence, submissions, and legal precedents, ensuring a fair hearing.

Further, the Tribunal clarified the procedural expectation:

"It is made clear that the appellants should not seek unnecessary adjournment for delaying the process of adjudication. Since the matter pertains to the period March, 2009 to March, 2011, which is very old, it is expected that the original authority should complete the de novo adjudication proceedings and passing of the order afresh, preferably within a period of three months from the date of receipt of this order."

This underscores the need for expeditious disposal of old cases to avoid prolonged litigation.

In conclusion, the Tribunal set aside the impugned orders and allowed the appeals by remanding the matters for fresh adjudication on all issues, including:

• Liability for GTA services tax vis-`a-vis corporate recipients.
• Inclusion or exclusion of reimbursement amounts in taxable value.
• Applicability of SEZ Act exemptions.
• Export of service exemption.
• Verification and consideration of all documentary evidence and legal precedents.