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2018 (8) TMI 493 - AT - Service TaxLevy of service tax - Goodwill - reimbursable expense - It is the case of the Department that the amount is the consideration received by the appellant for services provided by foreign service providers - Reverse charge mechanism - Held that:- Undisputedly, the services are in respect of due diligence, legal compliance requirements, market analysis, etc., made by the foreign service providers before incorporation of the appellant-company. The appellant-company has been issued certificate of incorporation only on 01.05.2008. These services are provided much prior to the date of incorporation. There has been no agreement between the appellant and the foreign service providers for providing service. It is actually M/s. RIHL which is the foreign company who has required the service providers to provide various services of due diligence before acquisition. In such event, merely because the said amount is shown in the books of the appellant, the activity cannot be considered as service provided to appellant so as to attract the levy of service tax. To levy service tax, the activity/transaction should involve a relationship of service provider and service recipient. In CBEC Education Guide (T.R.U.- Circular 20/ 2012), the Board has clarified the necessity to look into the quid pro quo in a transaction. It is explained therein that the concept of ‘activity for consideration’ involves an element of contractual relationship, wherein the person doing an activity does so on the desire of the person for whom the activity is done in exchange of consideration - In the present case, there is no desire on the part of appellant to the service providers that they should do any service to the appellant. Neither is there an offer nor an agreement by the service providers to provide service to the appellant. The consideration has also not been passed by the appellant to the service providers. In such event, the activity does not attract levy of service tax and the demand cannot sustain. Appeal allowed - decided in favor of appellant.
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