TMI Blog2022 (1) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... The demand on account of reimbursement of expenses to their employees working in the overseas branches does not constitute any remuneration in lieu of a service received by the appellants - the demand on account of services alleged to have been rendered by the overseas branches to the appellant is set aside. Other demand of about ₹ 78 lakh and ₹ 7 lakh - appellant submits that the demand and duty has been paid before the issue of SCN and as such no penalty can be imposed - HELD THAT:- In order to verify the competing claims of the appellant and the Revenue, the matter needs to go back to the original authority for verifying the records and arrive at the actual duty and interest payable. Further, it is found that no penalties can be imposed at this count. The appeal is partly allowed by way of remand - Service Tax Appeal No. 2227 of 2012 - Final Order No. 20002/2022 - Dated:- 4-1-2022 - MR. P. ANJANI KUMAR, TECHNICAL MEMBER AND MR. P DINESHA, JUDICIAL MEMBER Shri Ravi Raghavan and Shri Rohan, Advocates for the Appellant Shri P.Gopakumar, Authorised Representative for the Respondent ORDER The appellants are engaged in providing Consulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahm.) and Milind Kulkarni Vs CCE, Pune-I, 2016 (044) STR 0071 (Tri. Bom) held that going by the ratio of the above decisions and also the close reading of the proviso to Section 66A along with explanation therein, it is clear that the legal fiction of considering a branch of an assessee as a separate establishment is not to tax a service rendered to its head office. Further, there is no such service which has been identified with supporting evidence. Learned Counsel further submits that Tribunal has followed the case specifically in the case of the same appellant i.e. Kusum Healthcare Pvt. Ltd. 2019-TIOL-118-CESTAT-DEL and very recently vide 2021-TIOL-713-CESTAT-DEL. He also relies upon the decision in Precot Mills Ltd. Vs CCE, Tirupati, 2006 (2) STR 495 (Tri. Bang.). 3. Learned Counsel for the appellants further submits that an amount of ₹ 84,66,523/- was confirmed against towards Professional Consultancy Services and as well as the commission paid to foreign service providers. He submits that the same has been paid before issue of SCN and hence no penalty can be imposed. He further submits that an amount of ₹ 7,81,428/- has also been confirmed on account of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dispute came before the Tribunal for tax liability under the very same tax entry in Torrent Pharmaceutical Ltd. - 2015 (39) S.T.R. 97 (Tri.-Ahmd.). The issue of the expenditure incurred by the appellant with reference to the branch office located abroad, which was involved in activities, which may fall under business auxiliary service was considered by the Tribunal. The Tribunal observed as below:- 5.3 On the issue of demand of service tax of ₹ 11,56,32,589/- with respect to remittances made by the appellant to branch offices, both sides have relied upon the case law of M/s. British Airways v. CCE (Adj.) Delhi [2014-TIOL-979-CESTAT-MUM]. It is the case of the appellant that nearly ₹ 7 crore demand is with respect to salary of the employees of the appellant working in the foreign branch offices, treating the branch offices/establishments as service providers held by Revenue as a separate legal entities under the provisions contained in Section 66A(2) of the Finance Act, 1994. Senior Advocate appearing on behalf of the appellant strongly argued that in the light of provisions contained in Section 66A(2) of the Finance Act, 1994, the explanation-I has to be read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1. - A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted. 5.5 Section 66A (1) above is talking of service provider and service recipient as persons which has to mean as different business persons. Section 66A(2) and its Explanation I only make a clarification and to fix service tax liability on recipient of services under reverse charge mechanism that both the permanent establishments in India and abroad of a business person are to be treated as separate persons. The above clarification/distinction made in Section 66A in our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 66A(2) is limited to being a charging section in a specific context, it is not elastic enough to govern the corporate intercourse and commercial indivisibility of a headquarters and its branches. Therefore, any service rendered to the other contracting party by branch as a branch of the service provider would not be within the scope of Section 66A. Merely because there is a branch and that branch has, in some way, contributed to the activities of the appellant-assessee in discharging its contractual obligations, the definition of business auxiliary service in Section 65(19) of Finance Act, 1994 may not apply. That is where the impugned order has erred in not reading Section 65(105) along with Section 66A and Rules framed for the purpose of charging tax on services received from abroad. Unless both are applied together, the jurisdiction to tax would be in question. 23 . The catena of judgments cited for both sides, viz., British Airways v. Commissioner of Central Excise (Adjn) [2014-TIOL-979-CESTAT-Del = 2014 (36) S.T.R. 598 (Tri.-Del.)], Torrent Pharmaceuticals Ltd. v. Commissioner of Service Tax [2015 (39) S.T.R. 97 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble under Section 66A. 7. In view of the above, we are of the considered opinion that the demand on account of reimbursement of expenses to their employees working in the overseas branches does not constitute any remuneration in lieu of a service received by the appellants. Going by the ratio of the decisions cited above, we are in agreement with the learned Counsel s submissions that the issue is no longer res integra. Therefore, we set aside the demand on account of services alleged to have been rendered by the overseas branches to the appellant. 8. Coming to the other demand of about ₹ 78 lakh and ₹ 7 lakh, we find that the learned Counsel for the appellant submits that the demand and duty has been paid before the issue of SCN and as such no penalty can be imposed. However, learned AR for the Revenue disputes the payment of interest thereof. We are of the considered opinion that in order to verify the competing claims of the appellant and the Revenue, the matter needs to go back to the original authority for verifying the records and arrive at the actual duty and interest payable. Further, we find that no penalties can be imposed at this count. 9. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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