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TMI Blog2024 (9) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... Services (Provided from outside India and received in India) Rules 2006. A Show Cause Notice was issued on 23.10.2013, by invoking the extended period provisions, for the period 2008-09 to 2011-12, demanding Service Tax amounting to Rs.1,84,64,342. The appellants made their submissions questioning the quantification and provided documentary evidence towards their defence and submitted that they are not required to pay the demanded amount. After due process, the Adjudicating authority dropped the demand to the extent of Rs.57,17,640 and confirmed the balance demand of Rs.1,27,46,702. Being aggrieved, the appellant is before the Tribunal. 2. The Director of the company, appearing on behalf of the appellant submits that the details of Show Cause Notice for year-wise the service-wise demands are as per the following tables : Year USD Rs. Rate of Tax S.Tax. E.Cess She Cess Total 2008-09 - - 12% - - - - 2009-10 2536385 113951297 10% 11395130 227903 113951 11736984 2010-11 832664 37558595 10% 3755860 75118 37559 3868537 2011-12 622500 27755532 10% 2775553 55512 27756 2858821 Total 3991549 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess expenditure wrongfully considered by the department and service tax there on which is not corroborating with finacial data of the appellant Total Year USD INR USD INR USD INR USD INR INR Total USD Total INR 2009- 10 2490000 111788550 35552 1647193 10833 488554 0 0 27000 2536385 113951297 2010- 11 0 0 58580 2718140 106801 5006424 44783 2078499 0 210164 9803063 Total 2490000 111788550 94132 4365333 117634 5494978 44783 2078499 27000 2746549 123754360 Rate of Tax Inc. Cess 10.30% 10.30% 10.30% 10.30% 10.30% 10.30% Total S.Tax 11514221 449629 565983 214085 2784 12746702 6. He submits that the appellants has the following pleadings towards non-requirement of Service Tax payment of the above services : A. Database Usage charges - Demand : Rs.1,15,14,221/- : While in the books of accounts they have provided for the amount to be paid to the overseas entity [USD 2490000], due to severe recession, after mutual discussion and understanding with the overseas exporter, this amount was never paid to them. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate that FICO had not received any payment from the appellant in regards to the aforesaid invoices raised by them during the FY 2009-10. The certificate of FICO is provided in Annexure 16 Pg No. 197 of the Appeal Book. e. The appellant also submitted the certificate issued by the Statutory Auditor; State Bank of India, MSE Br. Salt Lake, STPI A Govt. of India enterprise evidencing that no payment was made by the appellant towards database usage charges to FICO. All these certificates are provided in Annexure 18 Pg No.209 to 211, Annexure 20 Pg No.215, Annexure 22 Pg No.219 to 220 of the Appeal Book. f. It is evident from all these certificates that the appellant did not make the payment to FICO towards database usage charges. g. Furthermore, the appellant states that the entire liability towards database usage charges to the tune of Rs. 111788550/- which was booked during F.Y. 2009-10 was written off in respective financial years based on the waiver of the invoice values by the FICO. The treatment of written off of liability was brought to the P&L A/c as income in respective F.Y and the appellant paid Income Tax thereon. Certificate of statutory auditor certifying the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in the USA, the appellant has provided an agreement in Annexure 24 Pg no. 284 to 287 which was executed between the appellant and the employee. Documents submitted to SBI SME Branch for remittance of salary abroad are provided in Annexure 25 Pg no. 288 to 300. The appellant states that salary does not come within the purview of section 65(105) of the Finance Act, 1994 and is considered as non-taxable services during the relevant F.Y. 2010-11. Hence, service tax to the tune of Rs. Rs.214085/- demanded on account of Salary may be set aside. D. Reimbursement of Expenditure - Demand Rs.4,49,629 Regarding reimbursement of marketing expenses paid to pure agent in USA for services received and exhausted in USA during F.Y. 2009-10 and 2010-11, the appellant submits that it made payment in foreign exchange towards reimbursement of expenses like travelling, conveyance, food, advertisement, banners, etc. These were out of pocket expenses reimbursed to pure agent of the Appellant on actual basis. All these payments were made through SBI SME Branch. Documents submitted to SBI SME Branch for remittance towards reimbursement of marketing expenses abroad are provided in Annexure 29 Pg no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard both the sides. Perused the Appeal papers and the other documentary evidence placed along with the synopsis and arguments adduced by both the sides. 12. There is no dispute with the legal provision that in terms of Section 66A of the Finance Act 1994, the receiver of the services from overseas, is required to discharge the Service Tax on Reverse Charge Mechanism basis, except in case of certain exceptions created on account of such services being received by individuals. Therefore, in the normal course, the Service Tax is required to be paid by the appellant if the payments have been made for overseas services received by them. 13. The main argument of the appellant in this case is that though they have made the provision towards the payment to be made towards the Database Usage charges to the overseas service provider, in view of the prevailing global financial crisis, based on a mutual agreement, the service provider waived the consideration to be paid to them. Therefore, as per the appellant though a provision has been made, as a matter of fact, this never resulted in actual payment / outflow of the foreign exchange to the overseas exporter. Hence, it is their argument th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made towards Salary, Reimbursement of Expenses and Legal Expenses, no amount has been paid towards the Database Usage charges. This corroborates the appellant‟s claim that the overseas service provider has waived the entire invoice amount of USD 2490000 in the subsequent years. (ix) Certificate dated 6.8.2015 [page No.219 to 220] addressed to the Commissioner Service Tax - 1 by the Chartered Accountants, Sen & Ray, certifying that the Database Usage Charges created as a liability at USD 2490000 in 2009-10, modified to USD 622500 in 2010-11, further modified to USD 500000 in 2011-12 was never paid and was „Written Off‟ in its entirety and considered as income in the books of account of the appellant. It certifies that the liability created towards "Legal Consultancy Charges" during the year 2009-10, was paid during the year 2010-11. This is produced as one of the evidence by the appellant for not having paid the Data Usage Charges of USD 2490000. 14. In this case, mere submission by the appellant that Data Usage charges have not been paid, would not be sufficient to take it on the face value. We have to see as to whether enough evidence ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In respect of confirmed demand of Rs.4,49,629, the appellant claims that the foreign exchange outflow is on account of expenses incurred by the overseas parties and the same has been reimbursed to them. On this ground they are seeking waiver of Service Tax payment. They have submitted the Certificate issued by SBI to this effect. They have also enclosed more than 160 documents like the main invoice, the connected expenses details like hotel bills, travel bills etc., to fortify their arguments. It would not be possible for the Tribunal to go through these documents to come to a conclusion as to whether they are in the nature of reimbursement or not. However, we are setting aside this demand of Rs.4,49,629 in view of the details being discussed in the coming paragraphs. 18. On going through the Show Cause Notice, we find that the allegation was that the appellants were incurring expenditure through foreign exchange outflow in respect of (a) royalty (b) management (c) consultancy fee (d) Data usage charges falling under BAS. During the period under consideration, i.e prior to 1.7.2012, the Show Cause Notice was required to be specific about the nature and classification of service u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2008-09 to 2011-12. The appellants have filed these documents on 26.06.2013, without any delay. Moreover, as rightly submitted by the appellant, the Service Tax if required to be paid, would be eligible to them as Cenvat Credit / Refund, which would result in revenue neutral situation. It is the trite of the Tribunals and Courts to hold that in such case, the extended period provisions do not survive. A case in point is the decision of Tribunal Hyderabad, which in the case of Asmitha Microfin Ltd v Commr. Of Cus., C. Ex & ST, Hyderabad-III, [2020 (33) GSTL 250 (Tri- Hyd)] wherein the Hon'ble Bench after placing reliance on the judgment of the Hon'ble Apex Court in Jet Airways (India) Ltd. v. Commissioner [2017 (7) G.S.T.L. J35 (S.C.)] has held that:- "However, we find that the demand is for the period April, 2009 to March, 2012 and the show cause notice was issued invoking extended period of limitation on 17-10-2014. The entire demand is under reverse charge mechanism and if the appellant had paid the service tax under reverse charge mechanism, they would have been entitled to Cenvat credit of exactly the same amounts. Therefore, the revenue neutrality in this case is ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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