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The Pr. Commissioner of GST, Delhi -South Commissionerate Versus McDONALDS India Pvt. Ltd.

2017 (10) TMI 514 - DELHI HIGH COURT

Taxability - outstanding dues - whether the amount shown as outstanding in the books of accounts of the Assessee as on 10th May 2008 would be amenable to service tax by virtue of the amendments? - amendment made in Explanation (c) to Section 67 of the FA 1994 - an explanation was added to sub-rule (1) under Rule 6 of the STR, 1994 by N/N. 19/2008/ST dated 10th May 2008 - The CESTAT has, in the impugned order, held that the amendment was made to Section 67 of the FA 1994 as well as Rule 6 of the .....

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ention behind the insertion of the above Explanation to Rule 6 of ST Rules corresponding to the amended Explanation (c) to Section 67 of the FA was to bring amounts receivable from the AEs of the Assessees to tax, the intention was not to make it retrospective, i.e. to tax the transactions that have taken place prior to 10th May 2008. Admittedly, the amount shown outstanding in the books of accounts of the Assessee pertained to the transactions that had taken place prior to 10th May 2008. As per .....

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decided against Revenue. - SERTA 7/2017 & C.M. No. 36005/2017 (stay) - Dated:- 9-10-2017 - S. MURALIDHAR & PRATHIBA M. SINGH JJ. Appellant Through: Mr. Harpreet Singh, Sr. Standing Counsel with Ms. Namrata Bharti, Advocate. Respondent Through: Mr. Nikhil Nayyar, Advocate with Mr. N. Sai Vinod, Ms. Smriti Shah, Advocates. O R D E R C.M. No. 36007/2017 (Exemptions) 1. Allowed, subject to all just exceptions. C.M. No. 36006/2017 (delay of 41 days in filing) 2. For the reasons explained in the .....

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e Respondent-Assessee was allowed and the order in appeal dated 25th July, 2013 of the Commissioner (Appeals) was set aside. 4. The Respondent-Assessee is a subsidiary of McDonald s Corporation, USA ( the holding Company ) which also happens to be its Associated Enterprise ( AE ). During the Financial Years ( FY ) 2006-07 and 2007-08, the Assessee provided management services or business consultancy services to its AE for undertaking franchise business in India. The Assessee was registered with .....

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tax. 5. By the FA 2008 effective from 10th May 2008, an amendment was made in Explanation (c) to Section 67 of the FA 1994 which defined the expression gross amount charged as under:- (c) gross amount charged includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited as the case may be, to any account, whether called Suspense account or by any other name, in the books of .....

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ce, in such case shall include, any amount credited or debited, whether called 'suspense account or by any other name, in the books of account of a person liable to pay service tax. 7. As a consequence of the above amendments, service tax was required to be paid on taxable service provided to AEs even where the consideration of such tax and services had not actually been received but had been shown in books of accounts as outstanding . 8. The question that arises in the present case is wheth .....

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above demand of tax, interest and penalty against which the Assessee went in appeal before the Commissioner (Appeals) who, by the order dated 25th July 2013, dismissed the appeal. The Assessee then went in appeal before the CESTAT which, by the impugned order, has allowed the appeal and set aside the adjudication orders as well as the order in appeal. 9. The CESTAT has, in the impugned order, held that the amendment was made to Section 67 of the FA 1994 as well as Rule 6 of the ST Rules only wi .....

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osition even more explicit particularly since it opens with the words for the removal of doubts . He also sought to urge that since the amounts are being carried forward even post the amendment to Section 67 and Rule 6, the Assessee was liable to pay service tax. 11. The Court finds that a similarly worded explanation to Section 65 (19) of the FA 1994, in the context of service tax payable on rendering service of promotion and marketing of lottery tickets, was held by the Supreme Court in Union .....

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e vague or ambiguous by the executive. In fact, the Board circular shows that invocation of clause (ii) had never been in contemplation of the taxing authorities. xxx xxx xxx 52. As stated hereinbefore, for the aforementioned purpose, the expressions like for the removal of doubts are not conclusive. The said expressions appear to have been used under assumption that organizing games of chance would be rendition of service. We are herein not concerned as to whether it was constitutionally permis .....

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