TMI Blog2017 (9) TMI 1560X X X X Extracts X X X X X X X X Extracts X X X X ..... would appear to us that the tenor of the various decisions handed down by the Tribunal, and cited by the rival sides, have not been appreciated for the valorous attempts to clarify this much-misinterpreted provision of Finance Act, 1994. It, therefore, devolves upon us to enlighten both disputants and, at the same time, provide ourselves with that steady and unwavering beam within which we will find the resolution to this dispute. The attempt in the present dispute was to hold the Indian branch of a foreign entity liable to tax on consideration paid to an overseas entity arising from contractual relationship of the foreign headquarters of the appellant with CRS/GDS operators outside the country. The thread of provider-recipient relationship as interpreted by Tribunal in the several decisions is unwavering and constant - demand set aside - appeal allowed - decided in favor of appellant. - ST/87669/2013 - A/89222/17/STB - Dated:- 21-8-2017 - Shri M V Ravindran, Member (Judicial) And Shri C J Mathew, Member (Technical) Ms Prajakta Menezes, Advocate for the appellant Shri R Kapoor, Commissioner (AR) for the respondent ORDER Per : C J Mathew This appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rating in India is the recipient of online information and database access and/or retrieval services, as defined in section 65(75) of Finance Act, 1994, which is taxable under section 65(105)(zh) of Finance Act, 1994 for which the adjudicating authority has relied upon the definition of the activity in section 65(75) of Finance Act, 1994, viz., ..... providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network The adjudicating authority has confirmed the proposal for recovery of the demand from the appellant who, being the recipient of this service, is liable for discharge of the tax liability, in terms of section 66 A of Finance Act, 1994 as the service is rendered by operators who are based outside India. 4. Before proceeding further, we must point out that unlike the cross-border movement of goods which is perceptible, specific identification of the moment of import of services is not so. It must also be noted that, unlike goods, there is no tax on import of services. The tax liability on services rendered from outside are sought to be fastened to countervail the levy that burdens a domestic transaction of lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal in Paul Merchants Ltd v. Commissioner of Central Excise, Chandigarh [2012-TIOL-1877-CESTAT-DEL] to assert that they not being- the person on whose instructions/orders the service is provided and who is obliged to make the payment for the same and whose need is satisfied by the provision of the service Just as in case of sale of goods it is the buyer who is obliged to pay for the goods purchased, in case of provision of service, it is recipient of this service who is obliged to pay for the service to the service provider and whose need is satisfied by the service order in other words is the buyer of the service. cannot be held to be the recipient of such service. Learned Counsel also disputes the classification of the service as the data is provided by the headquarters of the appellant to 'CRS/GDS' operator who, in turn, services travel agents. Reliance is placed on the decision of the Tribunal in United Telecom Ltd v. Commissioner of Service Tax, Bangalore [2009 (14) STR 212 (Tri-Bang)] and Nestli India Ltd v. Commissioner of Central Excise [2011 (22) STR 165 (Tri-Del)] in support of the proposition that ownership and provision of service go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicating Commissioner arrives at the classification of the service thus 4.2.2 ... .... It is a fact that the CRS companies do not own the data but they do involve in processing in the two way transactions of data between airlines and travel agents/passengers. They provide an electronic interface that facilitates this data processing and its retrieval/excess by the client. 4.2.3 the way, in which the transaction takes place, I find that the CRS companies provide the Noticee service in relation to access and retrieval of online data of the Noticee to their Travel agents and vice versa. I also find that any service provided by any person in relation to access and retrieval of online data is correctly classifiable under the category of ON-LINE INFORMATION AND DATABASE ACCESS AND/OR RETREIVAL SERVICES. As varied section 65 the definition of the said service is reproduced below..... ... XXXXXX 4.2.4 ... .... .... I find the ownership of the data is immaterial here. As per the definition, taxable service is any service provided ought to be provided to any person, by any person, in relation to on-line information and database access retrieval or both in electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h April 2006. The key expression authorising the collection of tax dues from the recipient of the service as a deviation from the norm of placing the burden on the provider is '......and such taxable service shall be treated as if the recipient had himself provided this service in India, and accordingly all the provisions of this Chapter shall apply:' 12. It is apparent that legislative wisdom considered it necessary to discard for this purpose the use of the expression 'person liable to tax' that applies to 'reverse charge' in a domestic situation and to substitute it with the legal fiction of the recipient being deemed to be the provider of the service and, thereby, subject not only to the tax but also all other obligations and privileges ensconced in the Chapter. It is not the force of administrative convenience that prompted the alteration but the dilemma of having to collect a tax from a nebulous entity that could not be identifiable as the corporeal person referred to in the various enumerations in section 65 (105) of Finance Act, 1994 and the apparent lack of jurisdiction over the overseas entity. Conversely, the recipient of the particular se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the existence in India of a branch of the overseas entity that entered into a contract with CRS/GDS operators. Convinced that tax liability under section 65(105)(zh) of Finance Act, 1994 did arise, and confronted by the impossibility of collecting it from agents by recourse to section 66A of Finance Act, 1994, the suggestion that British Airways (India), vicariously for British Airways (UK), should be deemed to be the recipient in India was not found acceptable because the Indian entity was held to be distinguishable from its overseas parent in view of the legislated disaggregation. Learned Counsel has seized that lifeline. 15. We take note of pendency of the appeal of Revenue before the highest court in the land but, in the absence of any stay of the order of the Tribunal, we have no choice but to remain on the path already trodden by this Tribunal. In the light of our discussions supra on the necessity of a harmonious construction of section 66A and the Rules framed for its implementation, we do not merely rely upon the precedent of the decision in re British Airways but also find that the impugned order has not established the appellant before us to be the recipient o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt to use branch transactions as a cover to blur the identification of recipient of service. This does not further the case put forth by Learned Authorised Representative that the decision in re British Airways may have had a different outcome had the benefit of the later decisions been available. On the contrary, all the decisions flow from the essential requirement to pinpoint the service, the provider of the service and the recipient of the service for the consideration to be taxable under Finance Act, 1994. 18. From these decisions, the common thread that makes itself visible may be stated thus: a) service tax is leviable only when recipient and providers are identifiable and identified; b) unlike domestic transactions, the identity of the provider/recipient are not distinct in cross-border service agreement c) in the context of exclusion of tax from the value of services that are exported, the Export of Service Rules, 2005 provide the framework for such blurring of the recipient in the context of services rendered d) such blurring or lack of administrative jurisdiction over provider cannot be allowed to stand in the way of taxing services that are sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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