TMI Blog2022 (6) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... , amount charged by foreign banks to Indian banksprima facie cannot be considered as service received by the appellant - the appellant cannot be treated as service recipient and no service tax can be charged from them under Section 66A of the Finance Act. Business Auxiliary Service - HELD THAT:- A comprehensive reading of Section 66A of the Finance Act, 1994, make it clear that 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 and such establishment situated abroad as a separate person , will be understood to have been prescribed only to determine the provision of service whether in India or out of India. In the present matter we find that department has not disputed the facts that the payment to overseas consultant/ agents/ service providers was made from the overseas projects site branch/ office of the Appellant and said Foreign Service providers have charged local VAT/GST/Service tax as applicable in the respective foreign countries in invoices issued by them to foreign site /project office /Branch office of Appellant. The said facts clearly established that the services have been p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, we set aside the demand on this service. Since the service of survey and technical consultancy is in relation to erection, commissioning and installation of transmission line, prima facie demand of service tax under the category of supply of tangible goods services is wrong. Further, the said service was provided and consumed outside India, therefore, demand of service tax is not sustainable. Technical Testing and Analysis Service - HELD THAT:- It can be seen from Rule 7(1) of the Service Tax (Determination of Value) Rules, 2006, as this rule is specifically applicable for reverse mechanism under Section 66A and for the purpose of discharge of Service Tax for the service provided from outside India, the value is equal to the actual consideration charged for the services provided or to be provided. In the impugned matter it is on records that in case of fees/ remunerations paid to overseas technicians Appellant have paid the service tax. Since the alleged amount was not paid for services but paid for travelling expense, accommodation charges etc. clearly said expenses cannot be considered as value of taxable service. Hence, demand of service tax not sustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Appellant in appeal memo/ submissions and during the course of arguments, are not dealt with. Appeal allowed - decided in favor of appellant. - Service Tax Appeal No.11064 of 2015, Service Tax Appeal No.11243 of 2015 - A/10685-10686/2022 - Dated:- 10-6-2022 - MR. RAMESH NAIR, MEMBER (JUDICIAL) AND MR. RAJU, MEMBER (TECHNICAL) Shri Prakash Shah Shri S.J Vyas, Advocates for the Appellant Shri T.G Rathod, Additional Commissioner (Authorized Representative) for the Respondent ORDER The present appeals have been filed by Appellants against the Order- in-Original No. AHM-EXCUS-003-COM-029-14-15 dated 20.01.2015 2. Briefly stated the facts of the case are that the intelligence was gathered that appellant received the various services from abroad but had not been paying service tax appropriately on the value of services received from the service providers who are not having fixed establishment in India under the provisions of Section 66A of the Finance Act, 1994. Investigation against the Appellant was initiated. As a result of investigation, it is found that Appellant have not paid /short paid service tax amounting to Rs. 10,01,69,147/- under differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provided in the statute that the service tax is liable to be paid on provisions made at the end of the year. 3.1 He submits that Cenvat Credit of input services available to the Appellant, the disputed service tax is available as credit to the Appellant and entire exercise is revenue neutral. During the period of dispute, Appellant paid both service tax and excise duty in cash in excess of impugned demand. Further, no service tax is payable under reverse charge for the services used in relation to exports of goods or services. He placed reliance on the following decision:- 3i Infotech Ltd 2017 (51) S.T.R. 305 Genom Biotech Pvt. Ltd. Vs. Commissioner 2016(42) STR 918 Jet Airways 2016 (44) STR 465 (Tri. Mumbai) J.P.P. Mills Pvt. Ltd. -2016 (46) STR 317 3.2 He also submits that Ld. Commissioner has confirmed the demand of Rs. 3,69,11,891/- under the Banking and Financial Service allegedly received by the Appellant by Foreign banks on the reverse charge basis under Section 66A of the Finance Act, 1994. The said demand comprises of two activities. First demand pertains to the bank charges charged by the foreign banks to the Appellant s bank in India fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the Appellant employed sales commission agent, marketing agents, technical advisors for liasoning activity with various customers and agencies, advisory or consultancy for settlement of disputes in connection with promotion of their business interest abroad. Admittedly neither the SCN nor the impugned order specify sub-clause of Section 65(19) under which service tax is demanded. In the absence of invocation of specific sub-clause, the impugned demand cannot be sustained. He placed reliance on the following decisions:- United Telecom Ltd. -2011(21)STR 234 Sharma Travels 2017 (52) STR 272 (Tri. Del) Amrit Foods 2005 (190) ELT 433 (SC) 3.4 He also submits that Appellant has paid service tax on reverse charge basis when service have been received from nonresident service provider in India under the taxable service category of business auxiliary service, for which payment has been made by the Appellant to the nonresident service providers. However, the services which have been provided by the nonresident service providers directly to the overseas site office of the Appellant and payment of which has also been made by the overseas site officers, no liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard the demand of Rs. 9,06,692/- under the Legal Consultancy Service under reverse charge for the services provided by the overseas service providers he submits that non-resident service provider had provided the service to the overseas site offices and the payment has been made by the overseas site offices. When the service provider as well as service recipient (overseas site offices) both are located outside India, no tax is payable in India. Further, Legal Consultancy service has become taxable with effect from 01.09.2009. Consequently, the demand prior to 01.09.2009 is liable to be set aside. 3.8 He also submits that Ld. Commissioner has confirmed the demand under the Legal Consultancy Service on the ground that Appellant has accounted for in the books of accounts as Legal and Professional Services. There is a general term in the books of account named as Legal and Professional Expenses which is not exactly similar to the definition of the Legal Consultancy Fees as defined in the Finance Act, 1994. Therefore general terms cannot be considered as strict definition in the statute. Some of expenses in Legal and Professional Services are for registration fees in Ukraine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. Commissioner relied upon the Journal Voucher dtd. 31.01.2009 and emails reproduced in impugned order to confirm the above demand. The Ld. Commissioner rejected the contention of the Appellant that the payment made to the foreigners were reimbursement of travel expenses. In order to tax the services under technical testing and analysis, it is necessary that such services are in relation to physical, chemical, biological or any scientific testing or analysis of goods or materials. In terms of the contract with the overseas buyers for supply of material, the Appellant has to perform testing of tower parts in its factory in the presence of the representative of the overseas buyers. The representatives of the overseas buyers merely witnessed testing process at the factory of the Appellant. The Appellants were required to and reimbursed only travel expenses. The payment is not for any services provided by the representative of overseas buyers. In addition to the visit of the representatives of the buyers in Bangalore, India, the representative of the buyers had also visited to witness testing of the towers parts in China. The testing took place in China. The representatives of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant from the bank account of overseas country. In case of Ethiopian Electric Power Corporation, it was mandatory to have the shipment through Ethiopian Shipping Line. The Appellant had provided support to the overseas customers in handling of the materials as per contractual terms and conditions, from the overseas port to the premises of the customers for which the customers had paid directly to overseas site offices of the Appellant. Thus, for handling of the material from overseas port to the premises of the customers, the Appellant have engaged local clearing and forwarding agency and payment of which were made directly from the overseas site offices from the consideration received from the overseas customers. Further the Appellant have also engaged an agency namely M/s World Wide Logistics Partner Inc, USA, to cater the need of handling of goods at the both the end that is from factory of the Appellant to the Indian port and from the destination port in overseas country to the premises of the overseas customers. For handling of the materials from the factory to the Appellant to the Indian Port and for carrying out activity of handling of material in India, M/s World ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, in any case, the Appellant were not liable to pay Service tax. 3.16 In respect of service tax demand of Rs. 12,93,403/- under the category of General Insurance Service on reversed charge basis he submits that during the relevant period appellant had paid the Insurance Premium from the overseas site and is part of overseas insurance of the material during the period of erection in the overseas country. The expenses has been incurred in relation to business or commerce carried out outside India and not in relation to business or commerce carried out in India. The Insurance charges paid directly from the site office in the local currency of the overseas country, the Appellant is not liable for payment of service tax as said services cannot be considered as service received in India. 3.17 As regard the demand of Rs. 2,71,047/- on the information and technology services, he submits said demand pertains to the expenses shown in foreign currency under the head Computer Expenses . The said expenses related to the maintenance of computer, replacement of part etc in the foreign site offices. Therefore, no service tax is payable. Further, the internet charges incurred by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not disputed the facts that the alleged services are covered under the Business Auxiliary Service. Further, the facts that the service providers do not have an establishment in India is also not disputed. Thus, Appellant are required to pay service tax on such expenses incurred by them under the reverse charge mechanism in terms of the provisions of Section 66A of the Finance Act 1994. 4.2 He also submits that Appellant have failed to drive home the point as to how the services availed by them were not classifiable under the legal consultancy charges. There is no dispute regarding the facts that such expenses had been booked under the head Legal and Professional Expenses in the books of account and as such it has to be construed that such legal professional consultancy service have been received and the same is liable to be classified as Legal Consultancy Service. 4.3 Further as regard the demand of service tax under the category of Supply of Tangible Goods Services he submits that in the agreement entered with foreign entities, the value of hiring charges and other charges are separately specified. Appellant was to pay hiring charges and other charges separately. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) of Rule 3 of import rule and as such even if this service is partly performed in India, it shall be treated as Services provided from outside India and received in India. Thus, Appellant are required to pay service tax on such expenses incurred by them under the reverse charge mechanism in terms of the provisions of Section 66A of the Finance Act, 1944 and the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. 4.6 He also submits that General Insurance Service as defined under Section 65(105)(zl) of the Finance Act, 1994 is covered under Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rule, 2006. For the services covered under Rule 3(iii), if the services are received by the recipient located in India for use in relation to business or commerce shall be treated as services provided from outside India and received in India. Appellant are required to pay Service tax on such expenses incurred by them under reverse charge mechanism. 4.7 He also submits that the expenses pertain to annual maintenance of software, software licence fees, software purchase, internet charges etc. are covered under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Building Construction Company W.P. (C) 1144/2016 -High Court of Delhi. 5. We have considered the submissions made by both the sides and perused the records. We find that from the arguments advanced by both the sides, the issue to be decided in this case is whether the appellant are liable to pay Service tax under reverse charge mechanism on above 8 services which have been provided by the service providers who are not having fixed establishment in India under the provisions of Section 66A of the Finance Act, 1944 and the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. 5.1 We now deal with the above issues and decide on each service -wise basis as under:- Banking and Other Financial Services. 5.2 The case of the department is that the Appellant was required to furnish Bank Guarantee in respect of the work of erection, commissioning and installation of high-tension power transmission towers abroad. For this the foreign banks charged bank guarantee commission. Also while remitting foreign currency earning in India, the foreign bank charged bank charges. These charges are in the nature of charges towards providing Banking and Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of United Telecoms Ltd. v. Commissioner of Service Tax - 2011 (22) S.T.R. 571 (supra) , Sharma Travels 2017(52) STR 272 (supra) and Balaji Enterprises v. C. Ex. S.T. - 2020 (33) G.S.T.L. 97 (supra) support their case. The said decisionsare squarely applicable to the facts of the present case and hence we find that the demand for service tax cannot be sustained on this ground alone. 5.4 Without prejudice, we also find that provisions of Section 66A(1) of the Finance Act, 1994 reproduced below provide as under. 66A. Charge 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders have charged local VAT/GST/Service tax as applicable in the respective foreign countries in invoices issued by them to foreign site /project office /Branch office of Appellant. The said facts clearly established that the services have been provided by the foreign agents to the foreign site office/branch office of Appellant and thus, the service cannot be said to be received in India when the same is provided outside India, used outside India and paid outside India. Therefore, demand of service tax in the impugned matter legally not correct on this ground also. 5.5 We also find that in this matter Ld. Commissioner has confirmed the demand on the ground that the arrangement to set-up an overseas office is a temporary arrangement made for the convenience of Appellant. The ultimate facts is that the site office abroad work under the umbrella of the head office located in Gandhinagar. At this stage it will be relevant to examine the judgment of M/s. British Airways v. CCE (Adj.), Delhi 2014 (36) S.T.R. 598 (Tribunal) (supra). The facts of this case were that M/s. British Airways PLC (BA, UK); with its registered office at Harmondsworth, UK; were an Airline engaged in providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a facilitator. In such a situation service tax can be charged from the branch office in India by treating it as service recipient even if the payment for the service received was made by the head office, as in such a situation, the Indian branch office can be treated as having made the payment indirectly. But in this case, as discussed above, from the agreements of BA, U.K. with CRD/GDS Companies, it is seen that there is nothing in these agreement from which it can be inferred that the CRD/GDS Companies were required to provide location specific service to the branches of BA, U.K. , all over the world. There is neither allegation nor evidence that BA, U.K. have charged any amount from the Appellant directly or indirectly by way of the debit/ credit notes, account adjustment or by other indirect means, for any services provided by the CRS/GDS Companies. From the above interpretation made in the case of M/s. British Airways v. CCE (Adj.), Delhi (supra) it has to be seen in the present proceedings whether while procuring services branch offices /site offices of the appellant abroad have acted only in the capacity of facilitators and the services so procured were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of arbitration. Explanation . -For the purposes of this item, the expressions arbitration and arbitral tribunal shall have the meanings respectively assigned to them in the Arbitration and Conciliation Act, 1996 (26 of 1996);] As per the above provisions, it is clear that the services in relation to advice, consultancy or assistance in any branch of law and representational services before the court and authority are taxable under this category. However without verifying the vital facts related to above services only on the basis of expenses booked under the accounting head Legal and Professional Expenses demand of service tax from the Appellant not sustainable. Moreover, Appellant also provided the reasons for which their overseas office /branch office paid the amount to services providers. For example fees for documents certification for submission to customers, local registration fees paid in Ukraine, Local municipal tax paid in Saudi Arabia, Fees for land for Brazil, paid to Saudi Chambers of Commerce for office maintenance and electricity charges, consultancy for CIS market for country Armenia etc. The said expenses cannot be concluded that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through their own operators and lessor had no control over the use of the machinery leased to the Appellant. Thus, it is clear that under the lease rental agreement exclusive right to use along with effective control and possession of the equipment has been transferred to the Appellant during the lease period. We also note that Tribunal in the case of Kinetic Communications Vs. Commissioner2017 (3) G.S.T.L. 319 (supra) in which the Tribunal has set aside the demand for service tax under above category has observed as follows :- 7. It is seen from the records that there is no dispute as to the fact that the capital goods are in the possession of the lessee and is being used by him for the intended purpose without any interference or hurdle from the appellants. Ongoing through the clauses of agreement, as produced before us, we find that the appellants had handed over the capital goods possession to the lessee as also the right to use. These two important factors that determine the requirement as to whether the service is a taxable service or otherwise under supply of tangible goods for use services . We find strong force in the contentions raised by the appellant that the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents expenses. We find that the said amounts cannot be considered as taxable under Technical Testing and Analysis service , as under the category of said service, the amount can be taxed as a testing fees or technical testing and analysis fees paid by the appellant, if any, to representative of overseas buyers. On perusal of the details submitted by the Appellant, we find that there are no such type of service charges paid by the appellant. The appellant has not paid any testing charges / testing fees and has only reimbursed the expenses incurred by representative of overseas buyer, in our view, the said expenses cannot be taxed under Technical Testing and Analysis service . 5.13 We observed that the CESTAT in the matter of Geno Pharmaceuticals Ltd. Vs. Commissioner of Central Excise, Goa, 2017 (47) S.T.R. 264 (Tri. -Mumbai) held that 2 . Heard both sides and perused the records. 3. The appellant herein appointed an agent named Shri S. Gupta by an agreement dated 3-3-2006. The said agreement provided that the agent shall provide services of promoting and marketing of the product sold to M/s. Nebula Trading Co. in the interior parts of Myanmar and the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the Hon ble High Court of Delhi in the case of Intercontinental Consultants Technocrafts Pvt. Ltd. (supra) will directly apply and the said expenses cannot be taxed under business auxiliary service . 8 . In view of the foregoing, we hold that the impugned order is unsustainable and liable to be set aside and we do so. 5.14 We also find that provisions of Rule 7(1) of the Service Tax (Determination of Value) Rules, 2006 would apply to this case. The said Rule 7(1) is reproduced below: 7. Actual consideration to be the value of taxable service provided from outside India - (1) The value of taxable service received under the provisions of Section 66A, shall be such amount as is equal to the actual consideration charged for the services provided or to be provided. It can be seen from the above reproduced Rule 7, as this rule is specifically applicable for reverse mechanism under Section 66A and for the purpose of discharge of Service Tax for the service provided from outside India, the value is equal to the actual consideration charged for the services provided or to be provided. In the impugned matter it is on records that in case of fees/ remunera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clude, handling of export cargo or passenger baggage or mere transportation of goods. The perusal thereof makes it clear that for anything to be defined as cargo handling service, it should be a bundle of activities as that of loading, unloading, packing or unpacking of the cargo along with providing for freight with or without the containers. The definition itself has an exclusion clause for excluding handling of export cargo or passenger baggage. Even mere transportation of goods is also specifically excluded. In the present matter it is not dispute that the Appellant have exported the goods to foreign customers and alleged services have been received for export purpose. Clearly, the handling of export cargo not taxable under the Cargo Handling Service . After having gone through the aforesaid definition, it leaves no amount of doubt in our mind that such a service tax could not have been levied on the cargo handling services availed by the Appellants for export purpose. 5.17 We also find that the Board vide Circular No. 11/1/2002-TRU, dated 1- 8-2002 as regard the cargo handling service had also clarified as under:- 6. All goods meant for export are excluded from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We do not agree with the finding of Ld. Commissioner as per our detailed discussion made in above paras that the comprehensive reading of Section 66A of the Finance Act, 1994, clearly provide that 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 and such establishment situated abroad as a separate person , will be understood to have been prescribed only to determine the provision of service whether in India or out of India. In the present matter we find that department has not disputed the facts that the payment to overseas insurance company was made from the overseas projects site branch/ office of the Appellant and said service was used only for the transportation of goods from overseas custom port to site of overseas customer. Moreover the overseas insurance company directly raised invoice on the foreign site office of the Appellant along with applicable taxed in respective foreign countries. The said facts clearly established that the services have been provided by the foreign Insurance Company to the foreign site office/branch office of Appellant and thus, the service cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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