TMI Blog2014 (3) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... her family members are covered and expenses are borne by the appellant. - Decided partly in favor of assessee. As regards global training centre, in view of the fact that learned counsel has made vehement submission that the appellant was providing commercial training and coaching service and the premises of global training centre is often used for conducting commercial coaching service on which service tax is paid, credit would be admissible since it becomes a premises of the service provider for providing the service of commercial training or coaching centre. At this juncture, it becomes necessary to note the fact up to 1.4.2011, setting up of a premises of output service provider was also an activity for which services used were eligible for credit. As regards hostel and gym, in respect of which various services received had been claimed to be input service, it is quite clear from the definition that both of them cannot be considered as premises from where the service is provided or an office relating to the premises from where service is provided. Liability of service tax - reverse charge - information technology software services received from overseas sub-contracto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioning or Installation, Public Relation Service, Advertising Space or Time, Sponsorship Service, Business Support Service, Renting of Immovable Property, Development and Supply of Content Services, Legal Consultancy, Business Auxiliary Service and Information Technology and Software Service. The appellant availed Cenvat credit on various input services including tax paid on group health insurance of employees and construction services availed at Mysore campus. Further the overseas branches of the appellant undertook several projects relating to software development etc., which were entrusted to overseas sub-contractors. The appellant received certain services outside the territory of India relating to data link and communication charges from foreign service providers, who were not licensed in terms of the provisions of section 4 of the Indian Telegraph Act, 1885. The department issued a show-cause notice dated 09.4.2010 proposing to deny Cenvat credit of Rs. 1,67,10,577/- on Employee Group Health Insurance and Cenvat credit of Rs. 9,47,02,918/- as pointed out in the audit enquiry dated 31.8.2009 for the period from April 2006 to March 2009. The issues relating to demand of tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received by the appellants through their branches and payments for such services had been made by the appellant. Assuming but not accepting the contention of the appellant that the services were received by their overseas branches, it was felt that in turn the branches were providing services to the appellant and as per the provisions of section 66A(2) the overseas branch would be a separate person for the purpose of charging service tax under import of service. The appellant had received some sub-contracting services from overseas subcontractors and the same was chargeable to tax under Import of Service under the category of Information Technology Software Service from 16.5.2008 onwards, as per the provisions of section 65(105)(zzzze) of the Act. 3. As a result of verification of records, three proceedings were initiated and the details of three proceedings and amounts involved, penalty imposed are as under : Service Tax Appeal No Period Cenvat credit availed on (Rs.) Demand of ST under RCM u/s 66A (Rs.) Penalties imposed Insurance Premium in r/o Group Health Insurance Scheme Construction of premises viz. Hostel, Food Court, Gym, etc. Inter-national Private Leased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Food Court, Gym Global Education Centre which have been constructed at Mysore campus. It was submitted during the hearing by learned counsel that in the campus, software development and its export took place during the relevant period. It was his submission that global education centre is required for recruitment and training of over 10000 employees in their software development and export activities. The training centre is clearly one where the activities related to business is conducted which is training to employees who participated in software development; and hostel and food court were part of the campus in which employees participating in work/training stay and use them for the purpose of discharging the duty as employees. It was also submitted that the global education centre is not only used for training for employees of only Infosys but also used for conducting training programmes for others. The appellant were discharging service tax under the category of Commercial Training and Education Services . In view of the decision in the case of Commissioner of Central Excise vs. Sai Samhita Storages (P) Ltd. [2011 (23) S.T.R. 341 (A.P.)], when the premises was used for prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Hon ble Supreme Court, Hon ble Bombay High Court in the case of C.C.E. vs. Ultratech Cement Ltd. [2010 (20) S.T.R. 577 (Bom.)] held that if the activity is related to business of the manufacturer and the service is covered by inclusive definition, credit would be admissible. That decision was also rendered in the case of a manufacturer and not in the case of an output service provider. 5.4. It was submitted by learned counsel that inclusive part of definition of input service has to be read in such a way that when considered, it would include the service rendered for hostel, gym, training centre, etc. Therefore, it would be appropriate to examine the definition of input service. Even though there are two periods under which the definition is required to be divided in the case of the appellants, the modification which came subsequent to 1.4.2011 would be relevant only for the period of about six months covered in the third show-cause notice. That would be applicable in respect of Insurance Premium. Therefore, the definition as it read prior to 1.4.2011 is being considered herein. The definition of input service reads as under : input service means any ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of input service has to be read with the main part. Therefore, it becomes necessary to examine the definition of input service in respect of a service provider by looking at Rule 2(l) (i) of the Cenvat Credit Rules with inclusive part. 5.5. Again while considering the provisions of inclusive part of definition also, in our opinion, it has to be read in the following manner. (a) includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises; (b) services used in relation to advertisement, sales promotion, market research, storage up to the place of removal, procurement of inputs; (c) services used in relation to activities relating to business such as accounting, audit, financing, recruitment and quality control, coaching and training, computer network, credit rating, share registry and security; (d) services used in relation to inward transportation of inputs or capital goods or outward transportation up to the place of removal. 5.6. Inclusive part of the definition as understood expands the scope of main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported by the decision of Hon ble High Court of Andhra Pradesh in the case of Sai Samhita Storages (P) Ltd. [2011(23) S.T.R. 341 (A.P.)]. However, subsequent to 1.4.2011, it is to be made clear that the services used in respect of modernization, renovation or repairs of premises from where service is provided only would be admissible. 5.9. As regards hostel and gym, in respect of which various services received had been claimed to be input service, it is quite clear from the definition discussed above that both of them cannot be considered as premises from where the service is provided or an office relating to the premises from where service is provided. Therefore, the question of their necessity or essentiality, in our opinion, is not really material once it is clear that the services are not covered by the definition itself. Needless to say that our conclusion is supported by the two decisions of Hon ble High Court of Bombay and Gujarat relied upon by learned AR. 5.10. The detailed discussion would show that the matter has to be sent back for recalculation of admissible amount since we have held that - (a) Credit is admissible in respect of global training cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e demand in this category is not sustainable and is set aside. 7.1. The next issue is whether appellant is liable to pay service tax in respect of information technology software services received from overseas sub-contractors to overseas branches of the appellant. The following points were submitted on behalf of the appellant: a. the foreign branches of the appellants received the service abroad, consumed the service abroad, which was provided abroad, and thus Section 66A has no application. b. the foreign service providers have charged local taxes, such as VAT, as evidenced by the invoices raised by them for the foreign service delivered, provided and rendered by them to the branches of the appellant. c. the branches of the appellant are sustained, maintained and funded out of the appellant HO in India, and the branches survive from the money sent to them, and payment made by the branches to the service providers abroad for overseas services, if taxed would amount to taxing fund transfers and is not service tax at all, and loses it character, and pith and substance. The demand is untenable. d. the foreign sub-contractors who rende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hes in turn use the service of sub-contractors and get the job done. The payments to the sub-contractors are done by the noticee through their EEFC account in foreign currency. It is evident from the trail of transaction that services are received by the noticee from the sub-contractors through their overseas branches and payments have been made by the noticee to the overseas sub-contractors. Hence services have been received by the noticee through their overseas branches and payments for such services have been made by the assessee which is evident from the expenditure incurred to the tune of Rs.259,08,53,512/- for the period from 16/05/2008 to 31/03/2009. Further, as per the provisions Section 66A (2) the overseas branch will be a separate person for the purpose of charging service tax under port of services. The noticee has received some sub-contracting services from overseas sub-contractor and the same is chargeable to tax under Import of Service under the category of Information Technology Software Service from 16/05/2008 onwards, as per the provisions of Section 65(105)(zzzze) of the Finance Act, 1994. The most important evidence for identifying a service recipient is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mechanism is the receipt of service and of course their liability would arise when payment is made. Unlike the case of availment of CENVAT credit where the receipt of service is required to be proved and shown to the Department by the assessee, in the case of determination of liability for service tax in the hands of receiver or provider, it is for the Department to show that taxable event has taken place. This issue is no longer res integra and there are several decisions in the case of Central Excise matters and Customs matters wherein it has been held that taxable even has to be proved by the Revenue. In the case of Central Excise duty, it is for the Revenue to show that manufacture has taken place and if the Revenue cannot show it, no liability arises. Therefore in this case the observation of the Commissioner that payment has been made by Infosys and when the payment is made by the branch, it has been made by Infosys through their branch and therefore obviously service has been received cannot be a conclusion and especially in this case when such an allegation is made and is rebutted, such rebuttal will have to be properly considered and evidence shown to show why such rebut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants have produced evidence to show that according to agreements and the invoices, the payments were received for services rendered abroad, utilised abroad and paid from funds received abroad. That being the position, concrete evidence to show that the payments made by the appellants either directly or through their branches to the sub-contractors in different countries has to be linked with service received in India and in the absence of any evidence to show that such receipt of service in India, the demand for service tax in the hands of receiver cannot be sustained. 7.8. At this juncture, it has to be noted that in paragraph 20 of the impugned order, it has been stated that the appellant had enclosed the sub-contracting agreement with Brainhunter Inc. which is the same one we have considered. We also find that many of the points which were urged before us had been urged before the original authority also. 7.9. There is also another interesting fact that was found when we were considering the adjudication order impugned before us. We have already reproduced paragraph 71 earlier as part of our discussion. The corresponding paragraph 5 in the show-cause notice is reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad himself provided the service in India,. 75. In terms of Section 66A read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 and Rule 3(iii) of the import of Service Rules, 2006, the service provided or to be provided by a person who has established a business or has a fixed establishment form which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and received by a person/recipient who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India. The above conclusion has been reached on the ground that a branch office also has to be treated as a separate person for the purpose of Section 66A. If the branch office has to be treated as a separate person for the purpose of Section 66A, when the invoice is raised on the branch office for service rendered and contract is entered into between the branch office and the service provider, it cannot be said that such contract has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on insurance premium in respect of group health insurance scheme as regards employees is set aside. However, the matter is remanded to verify and limit the demand to the extent of service tax payable on insurance premium attributable to families of employees, if other family members are covered and expenses are borne by the appellant. (b)(1) Denial of CENVAT credit attributable to services utilised for construction, maintenance or repair or renovation of Global Training Centre up to 01/04/2011 is not sustainable and is set aside. However for the period subsequent to 01/04/2011, if any service has been used for setting up of global training center, such credit would not be available. To examine this aspect and to quantify the amount in this regard, the matter is remanded to Original Authority. (b)(2) As regards credit of service tax paid on services used in respect of hostel, food court, gym etc., in view of the interpretation of definition we have given, CENVAT credit would not be admissible in respect of service tax paid relating to construction, maintenance, repair or renovation to these facilities. We find that credit has been simply disallowed in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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