Custom, Excise & Service Tax Tribunal
Arjav Diamonds I Pvt Ltd vs Commissioner Central Goods And Service ... on 6 February, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
SERVICE TAX APPEAL NO: 85765 OF 2019
[Arising out of Order-in-Appeal No: PK/984 to 985/ME/2018 dated 13th
December 2018 passed by Commissioner of CGST & Central Excise (Appeals-
II), Mumbai.]
Arjav Diamonds (I) Pvt Ltd
CC-9010A, Central Wing, 9th Floor, Tower 'C'
Bharat Diamond Bourse, Bandra-Kurla Complex
Bandra (E), Mumbai-400 051. ... Appellant
versus
Commissioner of Central Goods and Service Tax
Mumbai East
9th Floor, Lotus Infocenter, Near Parel Station
Parel, Mumbai - 400012. ...Respondent
WITH SERVICE TAX APPEAL NO: 85768 OF 2019 [Arising out of Order-in-Appeal No: PK/984 to 985/ME/2018 dated 13th December 2018 passed by Commissioner of CGST & Central Excise (Appeals- II), Mumbai.] Arjav Diamonds (I) Pvt Ltd CC-9010A, Central Wing, 9th Floor, Tower 'C' Bharat Diamond Bourse, Bandra-Kurla Complex Bandra (E), Mumbai-400 051. ... Appellant versus Commissioner of Central Goods and Service Tax Mumbai East 9th Floor, Lotus Infocenter, Near Parel Station Parel, Mumbai - 400012. ...Respondent APPEARANCE:
Shri Chirag Shetty, Advocate for the appellant Shri Dhananjay Dahiwale, Deputy Commissioner (AR) for the respondent ST/85765 & 85768/2019 2 CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) FINAL ORDER NO: 85213-85214/2025 DATE OF HEARING: 06/02/2025 DATE OF DECISION: 06/02/2025 These two appeals have arisen, in identical circumstances, from the finding that 'value added service', rendered by overseas entity in connection with import of rough diamonds by M/s Arjav Diamonds (I) Pvt Ltd, is liable to tax under Finance Act, 1994 in consequence of show cause notices for recovery of ₹ 9,50,000/- for 2013-14 and ₹ 33,51,695 for 2014-15 in continuation of proceedings initiated in show cause notice issued for a period prior to 1st July 2012 in the era of enumerated taxable service as well as for 2013-14 and are, therefore, disposed off by this common order.
2. The original authority fastened tax liability by resort to rule 3 of Place of Provision of Service Rules, 2012 on the finding that rule 4 to rule 12 did not apply in the case of the said activity and affirmation thereto, in order1 of Commissioner of CGST & Central Excise (Appeals-II), Mumbai disposing off both, is under challenge now.
1[order-in-appeal no. PK/984 to 985/ME/2018 dated 13th December 2018] ST/85765 & 85768/2019 3
3. Learned Counsel for appellant submitted that the activity does not fall within the frame of Finance Act, 1994 inasmuch as no service had been rendered and, relate, as they do, to certification which is statutory in nature. It is further submitted that the impugned order does not render a clear finding on the wherewithal for fastening of the tax liability on the appellant who is based in India. He placed reliance on the order2 of the Tribunal in M Suresh Company Pvt Ltd v.
Commissioner of Service Tax - IV, Mumbai disposing off appeal against order3 of Commissioner of Service Tax - IV, Mumbai in near identical circumstances and covering both periods viz., prior to negative list and period thereafter.
4. According to Learned Authorised Representative, the concatenation of the recipient being within India and of charges having been collected by the overseas entity would subject the consideration to tax under section 66B of Finance Act, 1994 read with Place of Provision of Service Rules, 2012. He submitted that the impugned order placed reliance on the decision of the Hon'ble High Court of Bombay in Indian National Shipowners Association v. Union of India [2009 (13) STR 235 (Bom)], and subsequently upheld by the Hon'ble Supreme Court, owing to which levy of tax on such services was legally valid after 1st July 2006.
2[no. A/85673/2023 dated 25th April 2023] 3 [order-in-original no. 46-47/STC-IV/MRRR/2015-16 dated 27th November 2015] ST/85765 & 85768/2019 4
5. It is seen that the impugned proceedings were one among continuing demands erected on details in the first show cause notice issued in the context of section 66A of Finance Act, 1994 read with section 65(105) of Finance Act, 1994 and Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 even as the context of the present dispute is levy under section 66B and section 67C of Finance Act, 1994 which came into effect from 1 st July 2012. The reference to facts and circumstances as well as law which has substantially altered for the period after 1 st July 2012 detracts from the validity of notice. It is also seen that the impugned order had upheld the order of the original authority who had discarded the applicability of rule 4 to rule 12 of Place of Provision of Service Rules, 2012 to latch on to rule 3 thereon as default provision. From a perusal of the said Rules, it would appear that rule 3 is general enunciation as, otherwise, rule 8 therein, relating to transaction between two parties within the taxable territory of India, would be otiose. It would appear that the activities impugned in the proceedings pertain to goods which were imported into India with prescribed certification involving ascertainment while these were yet outside taxable territory. Consequently, unless it was not possible to decide upon taxable territory being India, in terms of rule 4 of Place of Provision of Service Rules, 2012, but not being beyond the scope of taxation, rule 3 of Place of Provision of Service Rules, 2012 is not to be resorted to.
ST/85765 & 85768/2019 5 The issue has been squarely covered by the decision of the Tribunal, in re M Suresh Company Pvt Ltd, thus '5. On perusal of the case records, we find that apart from supplying the rough diamonds to the appellants, the overseas entity had supplied the value added service to the appellant, which were levied with the service tax demand by the department confirming those services to fall under the scope and ambit of the taxable service namely Business Support Service. The VAS services include supply of planning tools services which include continuity of supply, Intention to offer, Consistency of Boxes, sight holder Extranet services, SOC integrity (3rd party verification) provision of key Account Manager provided by them, as also Business sustainability services like consumer demand, consumer confidence, Best practice principles (BPP) (given at no additional cost along with supply of planning of tools services) which include creating consumer confidence for natural diamond, certification process to ensure that the diamond are mined from conflict-free zones and are not involved into illegal or illegitimate activities.
6. We find that the value added services provided by the overseas entity are part and parcel of the rough diamond supplied by them and considering the commission amount on such services, the Customs Department had assessed the bills of entry by including such value in the transaction value for the purpose of levy of Customs duty. It is not the case of Revenue that the value added services were otherwise can be arranged or provided by the appellant in furtherance to their business activities; rather availment of the said services were condition precedent, meaning thereby that, those services have to be compulsorily availed from the overseas entity and there is no choice for not availing those services. Insofar as ST/85765 & 85768/2019 6 Business Support Service is concerned the basic element to be looked into is that it is only on the outsourced services, the tax can be imposed and not otherwise. Considering the true scope and purpose of the definition of Business Support Service, the Tax Research Unit in the Department of Revenue vide D.O.F. No.334/4/2006-TRU dated 28.02.2006 has clarified as under. Such clarification was furnished pursuant to the changes made in the Finance Act, 1994 with regard to introduction of the new levy under the category of Business Support Service as a part of Finance Bill, 2006.
"3.13. BUSINESS SUPPORT SERVICES : Business entities outsource a number of services for use in business or commerce. These services include transaction processing, routine administration or accountancy, customer relationship management and tele-marketing. There are also business entities which provide infrastructural support such as providing instant offices along with secretarial assistance known as "Business Centre Services". It is proposed to tax all such outsourced services. If these services are provided on behalf of a person, they are already taxed under Business Auxiliary Service. Definition of support services of business or commerce gives indicative list of outsourced services."
From the above clarification issued by the TRU, it is observed that the intention of the legislature was to collect service tax on the outsourced services only. In the present case, since for provision of the value added services, the appellant had not outsourced services to the overseas entity, it cannot be said that such services provided by the overseas entity should be taxed under the category of Business Support Service. Thus, we are of the considered view that confirmation of the service tax demand in the adjudication order on Business Support Service will not stand in judicial scrutiny.' even though referring to dispute of a time before the 'negative list' ST/85765 & 85768/2019 7 regime.
6. In view of above facts and circumstances, there is no merit in the impugned orders which is set aside to allow the appeal.
(Dictated and Pronounced in Open Court) (C J MATHEW) Member (Technical) */as