Custom, Excise & Service Tax Tribunal
M/S.Nortel Networks India Private Ltd vs Cce, New Delhi on 17 October, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/decision:17.10.2014
Service Tax Appeal No.ST/2335/2012-CU(DB)
[Arising out of Order-in-Original No.112-ST/PKJ/CCE/ADJ/2012 dated 29.03.2012 passed by the Commissioner of Central Excise (Adjudication), New Delhi.].
M/s.Nortel Networks India Private Ltd. Appellant
Vs.
CCE, New Delhi Respondent
For approval and signature:
Honble Smt. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 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? 4 Whether Order is to be circulated to the Departmental authorities? Appearance: Rep. by Shri Tarun Gulati and Shri Kishore Kunal, Advocates for the appellant.
Rep. by Shri Amresh Jain, DR for the respondent.
Coram: Honble Smt. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) Order No.55025/2014Dated:17.10.2014 Per Rakesh Kumar The facts leading to filing of this appeal are, in brief, as under:-
1.1 The appellant having their office at Orchid Plaza, 2nd Floor, Sector-54, Sun City, Gurgaon, (hereinafter referred to as NNIPL) are a subsidiary of M/s. Nortel, Mauritius and are engaged in selling tele-communication network equipments as well as commissioning, installation, management, maintenance and repair and testing of telecommunication network. They have service tax registration for consulting engineers service; erection & installation services; management, maintenance or repair service, technical testing and analysis service, commercial & industrial construction service; and business auxiliary service. Besides this, they are also registered for Goods Transport Agency Service as service recipient for payment of service tax on the GTA service received by them. The period of dispute in this case is from October, 2002 to march, 2007. In course of scrutiny of their records including balance sheet by the jurisdictional central excise officers, it was found that during this period, they were receiving taxable service from their holding company, M/s. Nortel, Mauritius and also from a number of other foreign companies in respect of which they had not paid the service tax. From their records, it appeared the during the above mentioned period of dispute, they had received taxable service from their Associate Company (holding company) on which service tax leviable is Rs.3,18,73,116/- and from other companies they have received taxable service on which service tax chargeable is Rs.6,28,33,731/- and thus, it appeared that the total service tax chargeable on the taxable service received by them from foreign service provider is Rs.9,47,06,847/-. Accordingly, a show cause notice dated 24.04.2008 was issued to the appellant company for --
(a) recovery of service tax along with education cess and secondary and higher education cess amounting to Rs.9,47,06,847/- under proviso to Section 73(1) of the Finance Act, 1994 along with interest thereon under Section 75 ibid; and
(b) imposition of penalty on the appellant company under Section 76 and 78 of the Finance Act, 1994.
Since it appeared that the appellant company have paid service tax amounting to Rs.4,04,55,360/-, the show cause notice also proposed appropriation of the above mentioned amount against the service tax demand, interest and other dues.
1.2 The above show cause notice was adjudicated by the Commissioner, Central Excise, Delhi vide order-in-original dated 30.03.2012 by which he -
(a) confirmed the service tax demand of Rs.3,18,73,116/- in respect of taxable service received from the holding company, during the period of dispute along with interest thereon under Section 11 and appropriated an amount of Rs.6,95,545/- which was found to have been paid by the appellant company against this demand;
(b) confirmed service tax demand of Rs.87,20,909/- along with interest thereon under Section 75 in respect of taxable service received from other foreign companies and appropriated an amount of Rs.86,77,582/- which was found to have been paid by the appellant; and
(c) imposed penalty of Rs.4,05,94,025/- on the appellant company under Section 78 of the Finance Act, 1994.
The demand for the remaining amount of service tax in respect of the service received from the other foreign companies other than M/s. Nortel, Mauritius was dropped on the ground that service tax demand of Rs.3,67,00,349/- was in respect of the goods imported and not the services received and service tax demand of Rs.48,86,645/- had been counted twice. Against the above order of the Commissioner, this appeal has been filed.
2. Heard both the sides.
3. Shri Tarun Gulati, Advocate and and Shri Kishore Kunal, Advocate, the ld. Counsels for the appellant, pleaded that the service tax demand of Rs.3,18,73,116/- in respect of the service received from the appellants Associate Company (holding company) is not sustainable at all, as this demand is in respect of the services received during the period from October, 2002 to 31.03.2006 i.e. during the period prior to 18.04.2006 when Section 66 A had been introduced, that during the period prior to 18.04.2006, there was no provision for levy of service tax on the service received by a person in India from the person located at abroad and, therefore, in view of the judgement of the honble Bombay High Court in the case of Indian National Shipping Co. Association Vs. Union of India reported in 2009 (13) STR 235 (Bombay), service tax would not be chargeable, that for service tax, the taxing event is the provision of service and not the receipt of payment and since the service had been received by the appellant company from their Associate Company (holding company) abroad during the period prior to 18.04.2006, no service tax can be levied on the service received prior to 18.04.2006, even if the payment had been made after 18.04.2006, that the commissioner has confirmed service tax on the services received from the holding company during the period, prior to 18.04.2006 by invoking the Explanation- ( C ) to Section 67 of the Finance Act, 1994, which was introduced w.e.f. 10.05.2008 and which provides that the gross amount charged shall include book adjustment and any amount credited or debited, as the case may be, to any account, whether called Suspense Account or by any other name, in the books of accounts of a person liable to pay the service tax where the transaction of taxable service is with any Associated Enterprises, that by invoking this Explanation, the Commissioner has held that in respect of the services received from the Holding Company, the appellant would be deemed to have made the payment to the service provider, that Explanation- (C) to Section 67 having been introduced w.e.f. 10.05.2008 cannot be given retrospective effect, as there is nothing in this amendment to indicate that it has the retrospective application, that since in view of this, there was no service tax liability in respect of the services received from the holding company, as except for small amount of payment made on which service tax of Rs.6,95,545/- had been made, remaining amount had not been paid, for this reason also, there would be no service tax liability, that as regards the service tax demand of Rs.87,20,909/- in respect of the services received from other offshore companies during the period from 18.04.2008 to 31.03.2007, while the appellant do not dispute the service tax liability, the appellant under belief that w.e.f. 1.1.2005, they are liable to pay the tax, had on their own started payment of service tax in respect of the services received by them from offshore service providers and that if that service tax payment is taken into account, there would be no service tax liability, that this plea made by the appellant has not been considered and that in view of this, this demand is also not sustainable and that when no part of the service tax demand is sustainable, there would be no question of imposition of penalty.
5. Shri Amresh Jain, Departmental Representative defended the impugned order by reiterating the findings of the Commissioner.
6. We have considered the submissions from both the sides and perused the records.
7. There are two parts of the service tax demand. The service tax demand of Rs.3,18,73,116/- is in respect of the services received from the appellants Holding Company (Associate Company) and the fact that this demand is in respect of the services received for the period prior to 18.04.2006 is not disputed. In respect of this demand, the appellant had paid only a part of the amount to the service tax provider on which the service tax is leviable i.e. Rs.6,95,545/-, which has already been paid by them. The remaining amount had not been paid to the service provider, though a provision for the same had been made in the appellants books of accounts. The department has confirmed the service tax demand of Rs.3,18,73,116/- on the ground that on account of amendment to Section 67 by introducing Explanation w.e.f. 10.05.2008, the appellant company would be treated as having made payment on this date and, therefore, serviced tax would be chargeable. In our view, the ground on which this service tax demand has been made is totally wrong, as when undisputedly this service tax demand is in respect of the services received by the appellant company from their Holding Company located abroad in respect of services received during the period prior to 18.04.2006 and when the taxing event for the service tax is the provision of service and not the receipt of payment, in view of the judgment of Honble Bombay High Court in the case of Indian National Shipping Owners Association (supra), no service tax would be chargeable on the service received by the appellant company from the holding company located abroad during the period prior to 18.04.2006 and accordingly, this service tax demand is not sustainable.
8. As regards the service tax demand of Rs.87,20,909/-, this demand is in respect of service received by the appellant company form other offshore service providers during the period from 18.04.2006 to 31.03.2007. The appellant are not disputing the service tax liability. However, their plea is that during the period w.e.f. 1.1.2005, they had started paying service tax in respect of the taxable service received by them from the offshore service provider and, if that service tax payment is taken into account, there would be no service tax demand. According to para-29 of the Commissioners order, the appellant have already paid service tax amounting to Rs.93,73,127/- out of which, Rs.6,95,545/- has been appropriated against service tax demand of Rs.3,18,73,116/-, (which has now been set aside) and Rs.86,77,582/- had been appropriated against the service tax demand of Rs.87,20,909/- and thus, once the service tax demand of Rs.3,18,37,116/- is set aside, the net demand would be Rs.87,20,909/- against which, service tax payment is Rs.93,73,127/-. In view of this, sofar as the service tax demand of Rs.87,20,909/- is concerned, the same has to be set aside and the matter has to be remanded back for re-quantification after considering the appellants plea that they had started paying service tax w.e.f. 1.1.2005 in respect of the taxable services received by them from the offshore service providers. If the service tax of Rs.87,20,909/- demanded in this order had been paid by the appellant, there would be no service tax demand and no penalty. The appeal stands disposed of as above.
( Archana Wadhwa ) Member (Judicial) (Rakesh Kumar ) Member (Technical) ckp 1