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TMI Blog2023 (10) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... ess paid on the imports of technology under IPR service and also imported 'management consultancy service' from their group companies abroad, but had not discharged service tax on the TDS amount paid from April 2011 onwards, investigation was initiated and on completion, a show cause notice was issued on 29.09.2014 to the appellant for recovery of an amount of Rs.1,92,48,984/- under the category of Intellectual Property other than copyright service and an amount of Rs.51,71,248/- was also proposed to be recovered on the TDS amount with interest and proposal for penalty; also Rs.1,75,23,250/- proposed to be appropriated against the demanded amount on IPR service. On adjudication, the demand of Rs.1,75,23,250 was confirmed being the service tax not paid on IPR services imported by them for the period 2009-10 to 30.6.2012 and the amount already paid is appropriated; demand of Rs.51,71,248/- was also confirmed being short paid by them on the value of Management Consultancy Services imported during the period 2011 to 2013; interest under Section 75 confirmed; penalty amounting to Rs.2,26,94,498/- imposed under section 78 ; penalty of Rs.10,000 imposed under section 77 of the Finance act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as if the recipient had himself provided such service in India, and accordingly all the provisions of the Finance Act, 1994 shall apply. 3.2 She has further contended that, contrary to Section 66, Section 66A does not provide for the levy of service tax. It merely deems the recipient of service as the service provider, so all the provisions of the Finance act, 1994 are applicable to the service recipient as if he is the service provider. Thus, the provision creates a deeming fiction for the service recipient to be treated at par with the service provider. It means that Section 66 is the charging section under the Finance Act, 1994 for the purpose of levy under Section 66A as well. In support of their contention, the ld. Advocate referred to the Circular issued by the CBEC bearing F.No. 354/148/2009-TRU dated 16.07.2009, wherein it has been clarified that Section 66A in itself is not charging section, it only creates a legal fiction to deem import of services as provision of services within India so that the provisions of the Finance Act, 1994 can be applied to it. The charging section remains Section 66 even for the services imported. Thus, the tax collected from the recipi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chennai) (ii) Magarpatta Township De. & Construction Co. Ltd vs. CCE - 2016 (43) STR 132 (Tri. Mum.) (iii) Garware Polyester Ltd vs. CCE - 2017 (5) GSTL 274 (Tri. Mum.) (iv) Indian Additives Ltd vs. CCE - 2018 (6) TMI 523 - CESTAT CHENNAI (v) Centre for High Technology vs. CST - 2018 (8) TMI 243 - CESTAT NEW DELHI (vi) Hindustan Oil Exploration Co. Ltd. vs. CGST - 2019 (2) TMI 1248 - CESTAT CHENNAI (vii) Gayatri Hi-Tech Hotels Ltd vs. CCE & ST - 2022 (5) TMI 141 - CESTAT HYDERABAD (viii) VSL India Pvt Ltd vs. CST - 2023 (3) TMI 802 - CESTAT CHENNAI 3.4 The contention of the ld. Advocate for the appellant is that since service tax has already been discharged on the value of the services provided, therefore, there is no justification to demand service tax on the income tax component of the consideration as well. They have submitted that the demand cannot be sustained as the issue is of revenue neutral; in support, she has relied upon the judgement of the Hon'ble Supreme Court in the case of Nirlon Ltd. Vs. Commissioner of Central Excise - 2015 (320) ELT 22 (SC). 3.5 The ld. Advocate has further submitted that invoking of extended period of limitation in confirming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal for determination are whether : (i) the appellant are entitled to the benefit of Notification No. 17/2004-ST dt. 10.09.2004 when they discharged service tax under Section 66A of the Finance Act, 1994; and (ii) TDS amount be included in the gross taxable value on which service tax was paid. 7. The undisputed facts are that the appellant received intellectual property rights other than copy rights from their group companies located outside of India and discharged service tax under reverse charge mechanism as per Section 66A of the Finance Act, 1994 and availed the benefit of Notification No. 17/2004-ST dt. 10.09.2004. Revenue's objection is that since the appellant are not holder of intellectual property rights but discharged service tax as receiver of service by virtue of Section 66A of the Finance Act, 1994, therefore, the benefit of exemption Notification No. 17/2004-ST dt. 10.09.2004 cannot be extended to them. Revenue's argument is that only person, discharging service tax under Section 66, the charging section, could be eligible to the benefit of said notification. 8. We find that a similar controversy came before the Mumbai Bench of this Tribunal in Rochem Separation Sys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the appellant only on the ground that service tax was discharged by them under Sec. 66A of the Finance Act, 1994 on reverse charge mechanism basis. 10. On the issue of inclusion of the TDS amount paid by the appellant, the ld. Commissioner is of the view that it should form part of the gross taxable value for the period post 01.07.2012 under Section 67 of Finance Act, 1994 and under Rule 7 of the Service Tax (Determination of Valuation) Rules, 2006 prior to 01.07.2012. The relevant portion of Management service Agreement dated 01.01.2012 between the appellant and its related companies at Article 9 on payment of taxes stipulated as follows: "9.1 Payment shall be made in Euro within ten (10) days following invoicing or as otherwise agreed upon, through netting or any other mean agreed upon. To the extent not otherwise prohibited under applicable law, any amounts owned by one Party to another pursuant to this Agreement may be offset or netted against other indebtedness among such parties. 9.2 In the event one invoiced party fails to pay in due time any invoiced amount, then the sums due and payable to the invoicing party shall bear late interest based on the interest rate appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to include even the TDS it paid in the value of services, as in the case on hand. There is an argument advanced for the Revenue that as per the terms of agreement, it is for the appellants to bear the TDS and thus it is to be treated as part of the consideration. We are unable to yield to the said contentions since in such agreements where one is a non-resident and such nonresident doesn't have any PE, then it becomes the responsibility of the other party who is an Indian resident, to meet with the TDS obligation arising on account of the agreement in question. Even if such clause is not there in the agreement, still the resident cannot escape the tax liability and hence it becomes incumbent upon it to deduct tax at appropriate rate, at source, before making the payment. We find that the decisions relied upon by the appellant support our above view." 11. Following the aforesaid judgments of this Tribunal, we are of the view that the TDS amount paid to the Income Tax department by the appellant from his own account cannot form part of the consideration of the service charges paid to the overseas service provider, accordingly, service tax is not payable on the TDS amount paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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