Custom, Excise & Service Tax Tribunal
Ibm India Private Ltd vs Commissioner Of Central ... on 20 January, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH
BANGALORE
Appeal(s) Involved:
ST/142/2009-DB
[Arising out of Order-in-Appeal No. 109-2008COMMR LTU dated 30/10/2008 passed by Commissioner of Central Excise & Service Tax LTU Bangalore]
For approval and signature:
HON'BLE SHRI M.V.RAVINDRAN, JUDICIAL MEMBER
HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
Seen
4
Whether Order is to be circulated to the Departmental authorities?
Yes
IBM INDIA PRIVATE LTD,
SUBRAMANYA ARCADE NO- 12, BANNERGHATTA ROAD, BANGALORE
Appellant(s)
Versus
Commissioner of Central Excise,Customs and Service Tax
Commissioner of Service Tax, LTU BANGALORE
100 FT RING ROAD JSS TOWERS,
BANASHANKARI-III STAGE,
BANGALORE, - 560085
KARNATAKA
Respondent(s)
Appearance:
Mr. Mahesh Jai Singh, C.A. For the Appellant Mr. Mohammad Yusuf, A.R. For the Respondent Date of Hearing: 20/01/2016 Date of Decision: 20/01/2016 CORAM:
HON'BLE SHRI M.V.RAVINDRAN, JUDICIAL MEMBER HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER Final Order No. 20066 / 2016 Per : M.V.RAVINDRAN This appeal is directed against order-in-original No. 109/2008 Commr LTU dated 25.11.2008. The relevant facts that arise for consideration in this appeal is whether the appellant is required to discharge the service tax liability during the period 16.08.2002 to 30.11.2005 on the amounts paid by them to various entities situated abroad and whether they are liable to discharge the service tax liability on the marketing services undertaken by them in India for their own parent concern. The appellant herein has during the period prior to 18.04.2006 had repatriated accounts to their own sister concern, parent concern and various other service providers for the services rendered by them to the appellant. Revenue authorities were of the view that this amount which is repatriated is liable to service tax as per the provisions of Rule 2(d)(iv) of the Service Tax Rules. Department also came to a conclusion that for the period 15.3.2005 to 30.11.2005 appellant is liable to discharge service tax liability on the various activities undertaken by him for marketing of the goods of their own parent concern in India and during the period July 2003 to 19.11.2003 they are liable to discharge service tax liability as the amounts received them in convertible foreign exchange was not exempted as exemption Notification No. 6/1999 was withdrawn. Appellant contested the show cause notice so issued on merits as well as on limitation. The adjudicating authority did not agree with the contentions raised by the appellant and confirmed demand of the tax along with interest and also imposed penalties.
2 Learned C.A. for the appellant submits that as regards issue No. 1 i.e. services received from non-recipient service providers, entire services were received prior to 18.04.2006. It is his submission that the judgement of the Honble Bombay High Court in the case of Indian National Ship Owners Association will be directly applicable as the Apex Court has upheld the said judgement as reported at 2009-TIOL-129-SC-ST. He would submit that during the period in question, they have deposited the amount under protest and the same may be refunded to them. As regards Issue No. 2, he submits that the said issue is also now squarely covered in their favour by the majority order of the Tribunal in the case of Microsoft Corporation (I) (Pvt) Ltd Vs CST Delhi [2014(36)STR 766 (Tri-Del). He also relies upon the stay order passed by the Bench in this very same case to submit that for the period when the Notification No. 6/1999 was withdrawn, the Bench has held that despite the same, the fact of export of services is not disputed and no tax liability arises.
3. Learned A.R. reiterates the findings of the lower authorities.
4. We have considered the submissions made by both sides and perused the records.
5. Undisputed facts are appellant herein had rendered various services which are exported. They also have paid various amounts to the service providers who are situated abroad and have also undertaken the marketing of the services of their parent concern in India. It is the case of the Revenue that services as indicated are liable for tax.
6. As regards the issue No. 1 as to service tax liability on the amount paid by the appellant to foreign entities, it is undisputed that the said amounts which have been paid by the appellant is prior to 18.04.2006. The amounts have been paid by the appellant to the foreign entities for the services rendered by them. The provisions of Section 66A of the Finance Act 1994 came into Statute with effect from 18.04.2006 and for the period prior to 18.04.1006, the service tax liability does not arise on the appellant under reverse charge mechanism. This law is now settled by the Honble High Court of Bombay in the case of Indian National Ship Owners Association. We find that the said judgement of the Honble Bombay High Court was carried in SLP by the Revenue in Apex Court and the Apex Court has dismissed the SLP in view of the fact that the amount of service tax liability confirmed under this Head are prior to 18.04.2006. We set aside the impugned order and allow the appeal with consequential relief.
6. As regards Point No. 2 of service tax liability on the various amounts received by the appellant for marketing of the services of the parent concern, we find that there is no dispute as to the fact that the appellant is rendering the services such as selling, obtaining orders, providing the market support to identify and promote the products of M/s IBM World Trade Corporation(parent concern), it is undisputed that these services are provided in India and hence it is the case of the Revenue that the sales commission received are chargeable for service tax liability. In our considered view this issue is also now settled by a majority order of the Tribunal in the case of Microsoft Corporation(I)(P)(Ltd) (supra). The same view has been expressed by following decisions of this Tribunal:
1) Paul Merchants Ltd [2012-TIOL-1877-CESTAT-DEL]
2)Gap International Sourcing (India) Pvt Ltd [2014-TIOL-465-CESTAT-Del]
3) Blue Star Ltd Vs CCE Bangalore[2008-TIOL-716-CESTAT-BANG]
4)ABS India Ltd Vs CST Bangalore [2008(17)STT 223 (Tri-Bang)]
5)Lenovo India Pvt Ltd Vs CST Bangalore [2009-TIOL-911-CESTAT-Bang)]
6) IBM India (P) Ltd Vs CCE, Bangalore [2010-TIOL-154-CESTAT-Bang]
7) National Engineering Industries Ltd Vs CCE Jaipur [2008-TIOL-939-CESTAT-DEL] In view of the fact that the issue is now settled in favour of the appellant, we hold that the demand of service tax liability cannot be sustained.
7. As regards the demand of service tax liability for the period July 2003 to 19.11.2003 on the ground that the appellant cannot claim the benefit of Notification No. 6/1999 which granted exemption from payment of duty if the service which are provided are paid in convertible foreign exchange due to withdrawal of Notification No. 6/1999. We find that the issue is no more res integra there being no dispute of the services being exported by the appellant and the amount received by them are in convertible foreign exchange. It is the avowed principle of Govt of India that only services have to be exported and not the tax. If that be so, the case in hand, when there is no dispute as to the services being exported and the amount received in foreign exchange tax, liability arises on the appellant which is for the reason that Notification No. 6/1999 was withdrawn. We find that the Tribunal in the case of SGS (I) Pvt Ltd Vs CEST Mumbai [2011-TIOL-666-CESTAT-Mum] considering the entire situation of withdrawal of Notification No. 6/1999 held as under:
The view taken by the Central Board of excise & Customs vide Circular no. 66/2005-ST is that export of services would continue to remain tax-free even after withdrawal of Notification no. 6/94-ST dated 9.4.1999. The Board was examining the effect of withdrawal of Notification no. 6/99-ST. This Notification exempted the taxable service specified in section 65(48)( of the Finance Act, 1994 provided to any person, in respect of which payment was received in India in convertible foreign exchange, from payment of service tax. The Notification, in a proviso, laid down that nothing contained in the notification shall apply when the payment received in India in convertible foreign exchange for taxable services rendered was repatriated from or sent outside India . It was this Notification which was rescinded by Central Government by issuing Notification no. 2/2003-ST dated 1.3.2003. The Board was called upon to consider representations received from service sector, wherein an apprehension was raised that export of service would be affected adversely in the international market on account of withdrawal of notification no. 6/99-ST. The Board dispelled this apprehension by clarifying that export of services would continue to remain tax-free even after withdrawal of notification no. 6/99-ST. This clarification is certainly binding on the Revenue. Consequently, it has to be held that the reinstatement of the above exemption through notification no. 21/2003-ST dated 20.11.2003 cannot detract from the correct legal position clarified by the Board. For this reason, we hold that there can be no demand of service tax on the appellant on the ground that exemption notification no. 6/99-ST was withdrawn in March 2003 and identical exemption was reintroduced in November 2003. As a matter of fact, none of then notifications referred to export of services'. Again, as a matter of fact, the Central Board of Excise & Customs held export of services' to be tax-free notwithstanding the notifications. The law which categorically exempted export of services from payment of service tax was brought into force for the first time through the Export of Services Rules, 2003. Undoubtedly, the period of demand, in the present case, is prior to 2005. We find that the above said order of the Tribunal was taken in appeal by the Revenue to the Honble High of Bombay and the Honble High Court has rejected the appeal filed by the Revenue by a speaking order, as reported at........... In view of the fact that the issue is also now covered by the judgement of the Honble High Court of Bombay, we find that the impugned order in its totality is unsustainable and liable to be set aside.
8. In view of the foregoing, the impugned order is set aside and the appeal allowed with consequential relief if any.
(Order pronounced in open court) ASHOK K. ARYA TECHNICAL MEMBER M.V.RAVINDRAN JUDICIAL MEMBER pnr 2