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M/s. Coca Cola India Inc. Versus C.S.T., Delhi

2015 (12) TMI 415 - CESTAT NEW DELHI

Demand of service tax - Renting of Immovable Property service and Leasing of Vehicles - held that:- There is no evidence that the property which appellant leased was further (sub) leased by it to its group companies/ employees. The appellant had repeatedly stated that the properties leased by it were used by it for providing services to its group companies and for such services they charged their group companies on which it paid service tax. In these circumstances, it does not come out at all th .....

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evident from the paragraphs 38.4 and 38.7 quoted above, such onus has not been discharged by Revenue. Therefore, the question of levying service tax under “Renting of Immovable Properties” service does not arise.

For levying of service tax under reverse charge mechanism, Revenue has to first identify the taxable service received from abroad for which payment was made in foreign currency, which, as seen from the paragraphs of the impugned order quoted above, has not been done at all. .....

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service tax for the reasons given in their submissions and recorded earlier in para 3 and only foreign exchange expenses relating to tele-communication service and management consultant service were liable to service tax which it has paid along with interest. - Decided in favour of assessee. - Application Nos.ST/MISC/52801-52802/2014-CU[DB], Application Nos.ST/STAY/58890-58891/2013-CU[DB] & Appeal Nos.ST/58241-58242/2013-CU[DB] - Final Order Nos.53563-53564/2015 - Dated:- 13-8-2015 - Mr. Justic .....

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pertain to the lease rentals for immovable properties and vehicles, and n foreign exchange payments (under reverse charge mechanism). 2. In respect of appeal No.58241/2014 pertaining to Order-in-Original No.72/GB/2013, dated 26.04.2013, the appellant has contended that (i) it being an India branch office of Coca-Cola Inc., USA, entered into service agreements with its group companies for providing support services to them. (ii) Under clause 7 of the agreement, it reimbursed the out of pocket ex .....

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Similarly, it also incurred expenses, which were in the nature of reimbursement, to be claimed on actual basis without any mark up and even on that, it charged service tax and paid to Revenue. (iv) In the notes to accounts for the year 2010-11 para 6(a) from where the figures for office premises is taken, it was clearly mentioned that lease payments for taking premises on lease for the year were ₹ 5,58,66,278/- (previous year ₹ 5,99,70,317/-). These payments were recovered from the .....

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therefore the same was not charged to the Profit & Loss Account of the appellant. The lease rent was recovered from the group companies not because of the reason that the premises were sub-let to them, but because of the reason that the same was an expenditure incurred by the appellant in the course of providing the services to the group entities. (vi) Such recovery from user entities was not on account of rendering any service which amounted to renting of immovable property for the purpose .....

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with vehicle providers by the appellant for providing vehicles to the officials of the appellant. The lease payments for the vehicles were borne by the appellant but lease payments over and above the entitlement were recovered from the officials. During the year 2005-06, the appellant made lease payments amounting to ₹ 1,62,50,306/- (previous year ₹ 1,39,63,455/-), while it recovered from employees ₹ 7,04,409/- (previous year ₹ 14,39,410/-) being excess amount over their .....

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account. Similar notes were appearing in the balance sheets for the years 2996-07 to 2009-10. 3. Regarding foreign exchange payments, the appellant pleaded that (i) In order to attract the provisions of Section 66A of the Finance Act, 1994, first there must be a receipt of taxable service by the appellant from a foreign service provider, secondly, the money should have been paid in foreign currency and thirdly, the conditions mentioned in the Import of Service Rules, 2011 must be satisfied to at .....

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The appellant explained that the foreign exchange expenses as under:- Sl. No. Nature of activity Taxable/Non-taxable Reason for treating services non-taxable 1. Telecommunication Services Taxable [As per Section 65 (105) (zzzx) of the Finance Act, 1994] 2. Management Consultant Service Taxable [As per Section 65 (105) (r) of the Finance Act, 1994 3. Purchase of Forex Non- Taxable No service tax is liable to be paid as purchase of foreign exchange is not a taxable service as per the provisions of .....

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e journey was embarked outside India, no service tax is liable to be paid on such amounts. 7. Employee benefits Non-Taxable The same is not a taxable service as per the provisions of the Act. (ii) It revisited its accounts relating to foreign exchange expenses and examined the foreign exchange payments made by it during the relevant period. It was noticed that as mentioned in table above on some foreign currency payments, there may be a liability to discharge service tax. Accordingly, the appell .....

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entative, on the other hand, supported the impugned order reiterating the grounds/ reasons contained therein. 5. As both sides agreed that the appeals themselves can be taken up at this stage, we proceed to do so waiving requirement of pre-deposit. 6. We have considered the contentions of both sides. Regarding the demand of service tax pertaining to Renting of Immovable Property service and Leasing of Vehicles , we find that the adjudicating authority has taken due note of the contentions of the .....

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(on which they have claimed to have paid appropriate service tax as part of their service cost) then in such situation, question of recovery of amount from some other user entity cannot arise. Therefore, it becomes quite clear that recovery of amounts from some other user entities can be made only on account of renting of some properties. In such circumstances the demand of service tax under Renting of Immovable Property Service as mentioned in the instant Show Cause Notice is very well sustain .....

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herein. Therefore, in such circumstances, the contention of the party cannot be acceded to and I reject the same accordingly. I hold that M/s CCII is liable to pay service tax on this account as mentioned in the instant Show Cause Notice. Thus, it is evident that the adjudicating authority admitted that the factual position could not be examined by him. He has also not countered the contentions of the appellant that it was paying appropriate service tax on the amounts recovered for providing ser .....

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group companies/employees. In the Show Cause Notice or in the impugned order, no evidence that the appellant gave any premises on rent/lease has been mentioned. The appellant has shown that it took the premises on lease and therefore was a recipient of renting of immovable property service and not a provider thereof. The onus to establish that the appellant provided renting of immovable property service is on Revenue and as is evident from the paragraphs 38.4 and 38.7 quoted above, such onus has .....

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y and allowances in order to prove their claim that these amounts were already included therein and in these circumstances, the contentions of the appellant cannot be acceded to. In this regard it is pertinent to note that the onus of establishing that the immovable properties/vehicles were actually given on lease (sub-lease) by the appellant is on Revenue and as contended by the appellant, we also do not find any evidence to the effect that the appellant had given the immovable properties or th .....

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n the salary and allowances)] for providing service to its group companies has not been questioned by the adjudicating authority. In fact, the adjudicating authority has already dropped demand of ₹ 9,17,06,862/- relating to salary and allowances, moving and relocation, service charges for use of assets, staff welfare shown at Sl. No. 6 to 9 of the statement of the Show Cause Notice . In any case such reimbursements would not be liable to service tax under Renting of Immovable Property Ser .....

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r balance sheets during the period under dispute M/s. CCII has incurred Expenses in Foreign currency for the services received by them on which, they are liable to pay service tax under reverse charge mechanism. 39.2 In this regard M/s. CCII s defense is that service tax is not leviable just because some expenditure is incurred in foreign currency and to attract the provisions of Section 66A, first there must be a receipt of service by the company from a foreign service provider. Secondly, the m .....

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ts of the Balance Sheets that the foreign currency expenditures are on account of Travelling, Employee benefits, Moving & Relocation, Misc. Expenses, Telecommunication and Training & Development etc. These all elements show that the payments made against these elements are for making their working staff trained for rendering effective services to their group companies. Therefore, appropriate service tax is payable on these amounts by the service receiver under reverse charge mechanism in .....

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hority has not identified any taxable service for which service tax is liable to be paid under reverse charge mechanism. We find that while service tax under reverse charge mechanism has been confirmed on the foreign currency expenditure, there is not even a whisper in the adjudication order as to what were the taxable services received by the appellant from abroad to make it liable to pay service tax under reverse charge mechanism. For levying of service tax under reverse charge mechanism, Reve .....

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