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2021 (10) TMI 229 - AT - Service TaxDemand of service tax on ross-border transactions - place of provision of services - remittances made to their branches and offices abroad - consideration for taxable service procured from outside the taxable territory - HELD THAT:- The controversy in taxing of intangibles, fraught with obvious handicap of lack of visibility, is compounded when it comes to the imperative of bestowing ‘national treatment’ to services sourced from abroad owing to impossibility of ascertaining arrival at the territorial boundary. The saddling of demand on the one manifest aspect of service transactions, viz., ‘consideration’, without contextual reference to the taxable event, though irresistibly attractive to tax authorities, may not always be consistent with legislative intent. That has been the thrust of decisions of the Tribunal in several disputes arising from the fastening of tax liability in cross-border transactions. With the transition to the ‘negative list’ regime, the substance of the transformation is reflected in the combination of section 65B, section 66B, section 66C, section 66D and section 66E of Finance Act, 1994 with the insertions having been crafted to accommodate the broadened and general description of ‘taxable services’, as defined in 65B(51) of Finance Act, 1944. Documentation of the circumstances surrounding this paradigm shift does not offer any scope to infer that the concept which birthed the levy of services provided within the country, as well as those brought into the country, was intended to be re-shaped beyond the significant departure from the delineated description of each of the enumerated services hitherto existing. Rule 2 of Place of Provision of Service Rules, 2012 may well bring the locus back to demutualised relationship between the establishment in India and its branches abroad in much the same as Explanation 1 in section 66A did. And just as the determination of rendering of ‘taxable service’ in accordance with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 was essential for validation of any levy on ‘consideration’ remitted by principal office before July 2012, the Rules, along with the parent provision in Finance Act, 1994 and the charging provision are applicable only to ‘services’, conforming to the description elaborated in section 65B(44) of Finance Act, 1994 therein, without exception after June 2012. There is no such ascertainment or finding in the impugned order. Appeal allowed - decided in favor of appellant.
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