TMI Blog2017 (9) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... outside India and they have been received by their branches/entities outside India; therefore, they cannot be taxed under reverse charge mechanism contained in Section 66A of the Finance Act, 1994. However, the agreement made with the foreign vendors in case of repaired maintenance service also makes an express provision that service was to be provided both outside India and within India. But this provision that service was to be provided both outside and inside India will not affect the liability of Service Tax of the appellant. The fact is that the appellant was provided these services outside India and under “reverse charge mechanism” (Section 66A of the Finance Act, 1994) the appellant is liable for payment of Service Tax for such services - thus, from the provisions of Section 66A given above, it is clear that the appellant is liable for payment of Service Tax on subject services received with effect from 18/04/2006, when the provisions of Section 66A of the Finance Act, 1994 came into force, mainly for the reason that they have their main established business, fixed establishment and permanent address in India only. There is no dispute that the appellant is located in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders based outside India towards receipt of certain services under the categories of Maintenance Repairs Services and Business Auxillary Services under the cover of agreement entered into with the individual overseas companies/concerns. ii. DGCEI investigated the facts and issued Show Cause Notice (SCN) dated 24/02/2009 demanding service tax of ₹ 123.82 crores along with interest and for imposing penalties in respect of alleged non-payment of Service Tax for the services received by the appellant in the category of maintenance Repair services‟ Business Auxiliary Services outside India. iii. The show cause notice was adjudicated by the impugned Order in Original dated 14/11/11 confirming the demand and penalties as mentioned in para one above. 3. Therefore, the appellant is in appeal before the Tribunal. 4. Both sides represented by the Ld. Advocate, Shri P.K. Sahu and Shri R. P. Puri, Ld. CA for the appellant and Shri Amresh Jain, Ld. DR for the Revenue have been heard. 5. The Ld. advocate Shri P.K. Sahu on behalf of the appellant inter alia submits as follows: i. GSAs (General Sales Agents) appointed by the appellant have perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. (c) Soliciting, promoting and selling transportation on the Principal s services in the said territory and issuing Tickets, Exchange Vouchers/Orders and other necessary documents for this purpose, and also employing such staff as, in the opinion of the Principal, is sufficient and competent to do so. (d) Servicing and supervising the performance of Sales Agents in the assigned territory whom the Principal may direct the GSA to appoint on its behalf in accordance with its practice and procedure in the said territory or with whom the Principal may have in effect Sales Agency Agreements during term hereof. (e) Making sales promotional visits to Agents, other offices and individuals at regular intervals. (f) Compiling and dispatching such statistics, returns and reports as may reasonably be required by the Principal. (g) Providing and maintaining an office, suitable in the opinion of the Principal, in its place of business to be used exclusively for the transaction of business of the principal. (h) The General Sales Agent shall observe all directions and instructions given to it by the principal relating to the sale of air transportation. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cargo space. The functions performed/activities undertaken by GSA for NACIL are marketing and sales promotion functions/activities and customer care service functions/activities. They were also required to comply with the legal formalities and managing the sub-agents etc., however, it will not change the nature of the activity which remains basically the function of sales agent for selling and promoting the sales of passenger tickets and cargo space. The GSA are not the overseas branches but independent service providers in their respective areas. Thus, it is clear that the activities/functions performed by GSA would attract Service Tax liability under the head Business Auxiliary Service as defined under Section 65(19) of the Finance Act, 1994 (clause (ii, iii and vi) of definition of Business Auxiliary Service ) 8.2. After having examined the nature of the activity and the functions performed by GSAs on behalf of the appellant it is clear that said functions/tasks are covered under the category of Business Auxiliary Services . The definition of Business Auxiliary Service as per Section 65 (19) of Finance Act for the period of 16/6/2005 to 31/3/2007 (as given in para 30.2 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epair means any service provided by- i. any person under a contract or an agreement; r ii. a manufacturer or any person authorized by him, in relation to, (a) Management of properties, whether immovable or not; (b) maintenance or repair of properties, whether immovable or not; or (c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle; 9.1. It is an undisputed fact that the appellant is the recipient of services provided by foreign vendors for repairs of their aircrafts, engines, components etc outside India. 10. Services which have been mentioned above and which are covered under the definition of Business Auxiliary Service (BAS) and under the definition of Maintenance or Repair Service have been factually received by the appellant, though receipt is outside India. The appellant does not dispute the fact of receipt of these services. The appellant contests that these services have been provided to them wholly outside India and they have been received by their branches/entities outside India; therefore, they cannot be taxed under reverse charge mechanism contained in Section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices, for which they are the recipient even, when such services have been received by them outside India as per the provisions of Section 66A of Finance Act, 1994 under the Reverse Charge Mechanism read with Taxation of Services (Provided From Outside India and Received in India) Rules, 2006. These Rules have been framed in exercise of the powers conferred by Sections 93 and 94, read with Section 66A of the Finance Act, 1994. 10.3. In the present case, there is no dispute that the appellant is located in India. There is also no dispute that the services of GSAs and the foreign vendors providing repair and maintenance service have been received and consumed by the appellant; the appellant paid for the same to GSAs foreign vendors and they are the beneficiary of the same . The fact that those services were received outside India will not change the fact that the services have been paid for by the beneficiary appellant, who is located in India and benefits have been received by the appellant, who has got their fixed establishment and permanent address in India only. Thus they fulfill the conditions mentioned in the provisions of Section 66A of the Finance Act, 1994 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge of service tax on services received from outside India : (1) Where any service specified in Clause (105) of Section 65 is, - (a) provided or to be provided by a person who has established a business or has a fixed establishment from 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 (b) received by a person (hereinafter referred to as the 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, and accordingly all the provisions of this Chapter shall apply : 36.3 In exercise of the powers conferred by Sections 93 94 read with Section 66A of the Finance Act, 1994, the Central Government has framed Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. Rule 3(iii) of the Rules relevant for the present purpose is reproduced below : Rule 3. Taxable services provided from outside India and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Received in India) Rules, 2006. As per provisions of this rule, the taxable services provided from outside India received in India shall be such services as are received by a recipient located in India for use in relation to business or commerce. In the present case, indisputedly the recipient of services is the appellant located in India. The expression ―received by a recipient located in India‖ in Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 matches the expression ―received by a person who has his place of business, fixed establishment, permanent address or usual place of residence, in India‖ in clause (b) of Section 66A of the Finance Act, 1994. Harmonious reading of the provisions of clause (b) of Section 66A of the Finance Act, 1994 and the provisions of Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 makes it clear that the recipient located in India is liable to pay tax on the taxable services received for use in relation to business or commerce . Similarly as observed by the Tribunal above in Tata Steel case (supra) in the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce tax is not chargeable on such transactions in India. Using the same analogy for the services being performed in Hong Kong or outside India, which are being provided by GSAs and foreign vendors as per the facts on the record the appellant is liable to pay service tax on Reverse Charge basis as the final recipient and the consumer of such services is the appellant and the appellant being beneficiary of such services made the payment for such services accordingly. Thus, submission of the appellant that those services were performed outside India and consumed outside India is not an acceptable defense as per the present law of service tax. It is to be made clear that service tax being destination basaed tax, when the destination of consumption of the service is in India, the place of performance of service though it may be outside India, will not have relevance for the present facts for the chargeability of service tax. 10.7. The appellant submits that in their case the extended period clause of five years is not applicable and they should not be made liable for penalty, they being public sector entity and when they had bonafide impression that there was no liability on them to p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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