AI Structured Summary
Not yet generated for this judgment
Judgment
SI. No.,Nature of activity,"Taxable/ Non-
taxable",Reason for treating services non-taxable
1.,"Telecommunication
Services",Taxable,"[As      per      Sectio
65(105)(zzzx) of the Finance Act, 1994]
2.,"Management Consultant
Service",Taxable,"[As per Section 65(105)(r) of the Finance Act,
1994
3.,Purchase of Forex,Non- Taxable,"No service tax is liable to be exchange is not a
taxable service as per the provisions of the
Act.]
4.,"School
          Â
F e e s for American
Embassy School",Non- Taxable,"Educational services are not liable to service tax
as per the provisions of the Act.
5.,"Training and Development
at foreign locations",Non- Taxable,"As per IOS Rules, does not amount to import of
service, as the services are wholly performed
outside India.
6.,"Travel arrangement for
foreign
          Â
expatriates",Non- Taxable,"The levy of service tax as per Section 65(105)
(zzzo) of the Act is on a person embarking on
journey from India. Since the journey was
embarked outside India, no service tax is liable
to be paid on such amounts.
7.,Employee benefits,Non- Taxable,"The same is not a taxable service as per the
provisions of the Act.
payment made to the foreign parties and intimated the same to Id. Commissioner (Similarly, appropriate tax with interest was remitted in respect of",,,
Appeal No.58242/2013).,,,
Ld. Departmental Representative, on the other hand, supported the impugned order reiterating the grounds/ reasons contained therein.",,,
As both sides agreed that the appeals themselves can be taken up at this stage, we proceed to do so waiving requirement of pre-deposit.",,,
We have considered the contentions of both sides. Regarding the demand of service tax pertaining to ""Renting of Immovable Property"" service and",,,
Leasing of Vehicles"", we find that the adjudicating authority has taken due note of the contentions of the appellant, but has confirmed the demand",,,
essentially observing as under:-,,,
38.4 In this connection, I observe M/s. CCII has not submitted copies of the relevant lease agreements so the factual position in this regard",,,
could not be examined. Further, as per notes of accounts lease payments made by them have been recovered from some user entities. In case",,,
the properties taken on lease were used by M/s. CCII themselves for providing services to their group companies from whom reimbursements,,,
were made (on which they have claimed to have paid appropriate service tax as part of their service cost) then in such situation, question of",,,
recovery of amount from some other user entity cannot arise. Therefore, it becomes quite clear that recovery of amounts from some other",,,
user entities can be made only on account of renting of some properties. In such circumstances the demand of service tax under 'Renting of,,,
Immovable Property Service' as mentioned in the instant Show Cause Notice is very well sustainable and I hold it accordingly.""",,,
38.7 In this regard M/s CCII has contended that these payments recovered from the group companies are included in the account of",,,
'Salaries and allowances' which has been taken into account for charging service fees and consequently service tax has been collected and,,,
deposited to the department. In this connection, I find that the party has not provided details of the head 'Salaries and allowances' in order",,,
to prove their claim that these amounts are already included therein. Therefore, in such circumstances, the contention of the party can not",,,
be acceded to and I reject the same accordingly. I hold that M/s CCII is liable to pay service tax on this account as mentioned in the instant,,,
Show Cause Notice.""",,,
Thus, it is evident that the adjudicating authority admitted that the factual position could not be examined by him. He has also not countered the",,,
contentions of the appellant that it was paying appropriate service tax on the amounts recovered for providing services to its group companies. There,,,
is no evidence that the property which appellant leased was further (sub) leased by it to its group companies/ employees. The appellant had repeatedly,,,
stated that the properties leased by it were used by it for providing services to its group companies and for such services they charged their group,,,
companies on which it paid service tax. In these circumstances, it does not come out at all that the appellant leased or sub-leased any immovable",,,
properties to its group companies/employees. In the Show Cause Notice or in the impugned order, no evidence that the appellant gave any premises",,,
on rent/lease has been mentioned. The appellant has shown that it took the premises on lease and therefore was a recipient of renting of immovable,,,
property service and not a provider thereof. The onus to establish that the appellant provided renting of immovable property service is on Revenue and,,,
as is evident from the paragraphs 38.4 and 38.7 quoted above, such onus has not been discharged by Revenue. Therefore, the question of levying",,,
service tax under ""Renting of Immovable Properties"" service does not arise.",,,
As regards vehicles, the adjudicating authority does not counter the contention of the appellant that it had taken the vehicles on lease for providing the",,,
same to the officials and the lease payments for these vehicles were made by it. The adjudicating authority has only stated that he found that the,,,
appellant had not provided the details of the head ""salary and allowances"" in order to ""prove their claim that these amounts were already included",,,
therein"" and in these circumstances, the contentions of the appellant cannot be acceded to. In this regard it is pertinent to note that the onus of",,,
establishing that the immovable properties/vehicles were actually given on lease (sub-lease) by the appellant is on Revenue and as contended by the,,,
appellant, we also do not find any evidence to the effect that the appellant had given the immovable properties or the vehicles on lease or sub-lease to",,,
its officials. Indeed from the submissions of the appellant, it is clear that it had taken vehicles on lease and therefore was recipient of service and not",,,
provider thereof. Further, the appellant's contention that it has already paid appropriate service tax on the reimbursement recovered from its group",,,
companies [which included reimbursement towards lease rent paid by it for immovable property or towards the provision of vehicles for its officials,,,
(reckoned in the salary and allowances)] for providing service to its group companies has not been questioned by the adjudicating authority. In fact,",,,
the adjudicating authority has already dropped demand of Rs.9,17,06,862/- relating to ""salary and allowances, moving and relocation, service charges",,,
for use of assets, staff welfare shown at SI. No. 6 to 9 of the statement of the Show Cause Notice"". In any case such reimbursements would not be",,,
liable to service tax under ""Renting of Immovable Property Service"" or for taxable service relating to lease of vehicles. In these circumstances, we are",,,
of the view that the demands relating to renting of immovable properties and leasing of vehicles are not sustainable.,,,
As regards the component of the impugned demand pertaining to expenditure in foreign currency under reverse charge mechanism, we note that",,,
this component of demand has been confirmed by the adjudicating authority by observing as under:-,,,
39.1 In this regard, department's case is that as per balance sheets during the period under dispute M/s. CCII has incurred Expenses in",,,
Foreign currency for the services received by them on which, they are liable to pay service tax under reverse charge mechanism.",,,
39.2 In this regard M/s. CCII's defense is that service tax is not leviable just because some expenditure is incurred in foreign currency and,,,
to attract the provisions of Section 66A, first there must be a receipt of service by the company from a foreign service provider. Secondly,",,,
the money should have been paid in foreign currency and thirdly the conditions mentioned in the rules must be satisfied to attract service,,,
tax in the hands of the Indian company. No examination has been made by the Department whether at all there is a service rendered by a,,,
foreign service provider but tax levied without any examination; that Section 66A of the Act has been applied without examining the nature,,,
of payments made by the company.,,,
39.3 In this connection, I observe from the 'Notes to accounts' of the Balance Sheets that the foreign currency expenditures are on account",,,
of Travelling, Employee benefits, Moving & Relocation, Misc. Expenses, Telecommunication and Training & Development etc. These all",,,
elements show that the payments made against these elements are for making their working staff trained for rendering effective services to,,,
their group companies. Therefore, appropriate service tax is payable on these amounts by the service receiver under reverse charge",,,
mechanism in terms of the provisions of Section 66A of the Act, w.e.f 18.04.06. However, no demand under reverse charge mechanism for",,,
the period 2005-06 is sustainable in view of the decision of Hon'ble Supreme Court in case of Indian National Ship-owners Association,,,
(2010) 24 STT 366 (SC). Therefore, demand of service tax amounting to Rs.18,74,5431- on an amount of Rs.18,377,8731- (@10.20%)",,,
merits to be dropped and I hold it accordingly.""",,,
As is evident from the foregoing, the adjudicating authority has not identified any taxable service for which service tax is liable to be paid under",,,
reverse charge mechanism. We find that while service tax under reverse charge mechanism has been confirmed on the foreign currency expenditure,",,,
there is not even a whisper in the adjudication order as to what were the taxable services received by the appellant from abroad to make it liable to,,,
pay service tax under reverse charge mechanism. For levying of service tax under reverse charge mechanism, Revenue has to first identify the",,,
taxable service received from abroad for which payment was made in foreign currency, which, as seen from the paragraphs of the impugned order",,,
quoted above, has not been done at all. This is clearly fatal. It can be nobody's case that any amount spent in foreign exchange is liable to service tax",,,
under reverse charge mechanism; such expenses have to be shown to be related to import of taxable service. Even so, the appellant has on its part",,,
stated that the expenditure relating to purchase of foreign exchange, school fees for American Embassy School, training and development on foreign",,,
locations, travel arrangement for foreign expatriates and employee benefits are not liable to service tax for the reasons given in their submissions and",,,
recorded earlier in para 3 and only foreign exchange expenses relating to tele-communication service and management consultant service were liable,,,
to service tax which it has paid along with interest.,,,
Issues involved in Appeal No.58242/2013 are identical and therefore the aforesaid discussion is also mutatis mutandis applicable thereto.,,,
In the light of the foregoing analysis, we set aside the components of demand pertaining to ""Renting of Immovable Property"" service and ""Leasing",,,
of Vehicles"". With regard to the demand pertaining to the expenditure in foreign currency under reverse charge mechanism, we set aside this",,,
component of the demand as well; and remit the cases to the adjudicating authority to clearly identify the taxable services in respect of which service,,,
tax under reverse charge mechanism is leviable and quantify the service tax if and so leviable taking into account the submissions of the appellant in,,,
that regard, after giving it an opportunity of being heard. Needless to say that the penalties will have to be re-adjusted accordingly. Stay applications",,,
and miscellaneous applications for early hearing stand disposed of with the disposal of the appeals themselves.,,,