Custom, Excise & Service Tax Tribunal
Levis Strauss India Pvt Ltd vs Bangalore Service Tax-Ii on 22 October, 2024
Service Tax Appeal No.21353/2017
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
BANGALORE
1st Floor, WTC Building, FKCCI Complex, K. G. Road,
BANGLORE-560009
Regional Bench COURT-2
Service Tax Appeal No. 21353 of 2017
[Arising out of the Order-in-Original No.56/2016-17 dated 22.05.2017
passed by the Commissioner of Service Tax, Bengaluru.]
M/s. Levis Strauss India Pvt., Ltd.
No.22, SJR Cyber,
7th Floor, Hosur Road,
Adugodi Post Office,
Bangalore - 560 030. ............. Appellant
VERSUS
Commissioner of Central Excise & Service Tax,
4th Floor, T.T.M.C - B.M.T.C.
Bus Stand Building, Old Airport Road,
Bengaluru
Karnataka - 560 071 .....Respondent
Appearance:
Mr. Sanjeev Nair, Advocate Appeared for Appellant Mr. M.A. Jithendra, Authorized Representative for Respondent Coram:
Hon'ble Mr. P.A. Augustian, Member (Judicial) Hon'ble Mr. Pullela Nageswara Rao, Member (Technical) Final Order No. 21233 of 2024 Date of Hearing: 23.04.2024 Date of Decision: 22.10.2024 Page 1 of 21 Service Tax Appeal No.21353/2017 Per: P.A. Augustian M/s. Levis Strauss India Pvt. Ltd., the Appellant is holder of service tax registration under 'Business Auxiliary Service', 'Management, Maintenance or Repair' Services and 'Intellectual Property Right' Services. During audit of the records of appellant for the period April 2011 to March 2012 it is noticed that appellant had not complied with the statutory provision relating to service tax and failed to discharge service tax liability on software license fee, sponsorship service, import of service, renting of immovable property service and services received from associated enterprises. Further they have also delayed the payment of service tax in violation of the provisions of Point of Taxation Rules, 2012 and had not taken registration for 'Sponsorship' services and Information Technology Software' services. Accordingly, a SCN dated 06.02.2014 was issued for the period from April 2011 to March 2012 demanding service tax and interest. Thereafter, Adjudicating authority as per the impugned order confirmed the demand with interest and penalty. Aggrieved by the said order, present appeal is filed before the Tribunal.
2. When the appeal came up for hearing, the Learned Counsel for the Appellant submitted that the Appellant is an Indian Pvt., Ltd., Company engaged in marketing and distribution of 'Apparel and Garments' under various brands of Levi Strauss & Co and operates through network of distributors and franchises. The Learned Counsel drew our attention to the table describing the various demands confirmed by the Adjudicating authority against the Appellant. Page 2 of 21
Service Tax Appeal No.21353/2017 Sl.
Description Amount (Rs.)
No.
1 Demand for Sponsorship Services availed 1,01,86,502
2 Short payment on intercompany services 13,30,558
Interest demand due to belated tax
3 20,371
payment
4 Demand under Renting services 2,45,58,483
On import of Services availed from
5 73,00,732
associated enterprises
6 Demand for Software license fee 28,04,092
4,61,80,367(tax)
20,371(int)
TOTAL 4,62,00,738
3. As regards the demand under the category of 'Sponsorship' fee, the Learned Counsel submitted that as per the impugned order, it is held that Appellant had booked expenses towards sponsorship fee to various parties including Confederation of Indian Industries as sponsorship for a marketing summit. Since the sponsorship service is falling under the category of Section 65(105)(zzzn) of the Finance Act, 1994 and as per Section 66A, service recipient is liable to pay service tax under Reverse Charge Mechanism (RCM) on 'Sponsorship' service. In this regard, the Learned Counsel drew our attention to the definition of 'sponsorship' under section 65(99a) of the Finance Act, 1994;
"The term "sponsorship" includes naming an event after the sponsor, displaying the sponsor's company logo or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition".Page 3 of 21
Service Tax Appeal No.21353/2017
4. Learned Counsel submitted that as per Para 3(ii) of impugned order after verification of financial records, it is alleged that the Appellant had booked expenses towards "Sponsorship' and the total consideration is Rs.8,75,84,323/- during the period from 2007 - 2008 to 2011 - 2012 and service tax demanded from the Appellant was Rs.1,01,86,502/-. In this regard the Learned Counsel drew our attention to the Chartered Accountant (CA) certificate produced by them in reply to the show cause notice dated 26.02.2017 and submitted that by clubbing major part of the expenses for different services, it is alleged that it is spent for 'Sponsorship' services. Appellant furnished details of each of expenses separately as follows: -
Amount Description Justification (Rs.) The appellant has incurred expenses on advertising and promotion. Advertisement and promotion expenses are not covered under Reverse Charge Mechanism (RCM) and hence the there is no liability on the Advertising and recipients of the service to pay any service Promotion 3,07,11,616 tax. Such services are subject to service tax Expenses under forward charge basis and the vendors have duly discharged service tax as applicable. The same is evidenced on the basis of the sample invoices enclosed as Annexure 19 to the Appeal The instant category of services are not subject Donation to Service Tax, since the same does not 2,00,000 tantamount to provision of service. The amount pertains to Entry fee paid by the Appellant for participating in Retail Award. Service tax liability in the instant case falls on Entry Fee for the service provider under forward charge basis 25,000 Retail Awards and the vendors have duly discharged service tax as applicable. The Appellant being the service receiver has no liability to pay service tax under Reverse Charge Mechanism (RCM) in Page 4 of 21 Service Tax Appeal No.21353/2017 whatsoever manner.
In the instant case the Appellant organizes certain events in relation with their business for which they receive services from event management companies. The liability to discharge service tax on such service is on the service provider under forward charge basis and Event the vendors have duly discharged service tax as 6.61,054 Management Fee applicable. The Appellant is receiving services from the event management companies and hence, as the onus of discharging service tax on such services is on the service provider under forward charge the Appellant being the service receiver are not liable to pay any service tax under reverse charge.
The same pertains to fee which is paid to participate in fashion show. The Appellant pays a sum of amount to the organizing committee to participate in Fashion show. In the instant Fashion Show fee 98,43,173 category service provider is liable to pay service tax under forward charge basis. In the instant case the Appellant is a service receiver hence the Appellant is not liable to pay any service tax under Reverse Charge Mechanism (RCM).
Such expenses have been incurred by the Appellant on food and beverages. The instant category is outside the ambit of service tax.
Food and Such services are not covered under Reverse 5,81,810 beverage Charge Mechanism and hence Appellant is not liable to pay any service tax under Reverse Charge Mechanism (RCM) on the expenses incurred on food and beverages.
Line presentation is a type of fashion show where models showcase the new collection of Levi to the franchisee. The appellant receives services from different modelling agencies. The onus of payment of service tax on such service Line presentation 1,78,22,373 falls on the service provider under forward charge basis. The Appellant being the service receiver does not have any liability to pay the service tax under reverse charge Mechanism.
The same is evidenced basis the sample invoices enclosed as Annexure 19 to the Appeal.
Page 5 of 21
Service Tax Appeal No.21353/2017 The amount paid relates to purchase of goods.
Material 17,84,556 As per the settled law no service tax is liable to Purchased be paid on purchase of goods.
Out of pocket expenses are mere petty cash Out of Pocket expenses. The same is outside the ambit of 9,67,174 Expenses service tax and hence no liability arises to pay service tax on the instant category.
The same pertains to purchase of goods. As the amount paid relates to purchase of goods i.e. Printing 30,84,549 cartridges, papers and other stationery. No Expenses service tax is liable to be paid on the purchase of goods.
Service tax on This represents the tax portion on Sponsorship 3,47,192 Sponsorship and hence no tax should be levied on tax.
The instant category is taxable on Reverse Charge Mechanism (RCM) basis and hence the Appellant had appropriately discharged their Sponsorship Fees 2,15,55,828 liability of service tax under reverse charge mechanism. The same is evidenced as per the challan copies enclosed as Annexure 18 to the Appeal.
5. Thus, the total amount spent by the Appellant under the category of sponsorship fee is only Rs. 2,15,55,828/- and not the consideration of Rs. 8,75,84,325/- as confirmed in the impugned order. The expenses towards the advertisement and promotions, expenses for, etc. cannot be considered under the category of 'sponsorship' services and all these categories are not subject to payment on Reverse Charge Mechanism (RCM). The Learned Counsel also drew our attention to the invoices issued by the service provider in such cases and submitted that as evident from the invoices, service tax was charged by the service providers for availing such services, including the same under the category of 'sponsorship' service and demanding service tax under Reverse Charge Page 6 of 21 Service Tax Appeal No.21353/2017 Mechanism (RCM) basis from the Appellant amounts to double taxation and prima facie illegal and unsustainable.
6. Learned Counsel further submitted that it was only as per instruction given by the Adjudicating authority, Appellant had produced the Chartered Accountant (CA) certificate certifying the above said entry in the document and if the said certificate was not sufficient to consider the above submissions, the Respondent ought to have demanded further evidence rather than rejecting the same outright. The learned Counsel drew our attention to the decision of this Tribunal in this regard in the matter of M/s Titan Industries Vs. CC, Bangalore
-2006 (194) E.L.T 38 (Tri. Bang), where this Tribunal has held that if the Adjudicating authority is not satisfied with the Chartered Accountant (CA) certificate, the Appellant should be given an opportunity to provide further documentary evidence. The learned Counsel also relied on the decision on the matter of CCE, Mumbai-III Vs. M/s MIRC Electronics Ltd. and CC, Vapi, Vs. M/s Manisha Pharma Pvt., Ltd., The learned Counsel also relied on the decision in the matter of M/s. Gujrat State Fertilizers & Chemicals Vs. C.C.E Vadodara.
7. As regarding the service tax demanded on intercompany management service, learned Counsel drew our attention to the challan evidencing payment of the same and submitted that they have received services under the above said category for a consideration of Rs.21,66,08,189/- and they have paid entire service tax amounting to Rs. 2,23,79,555/- and there are no details furnished by the Adjudication Authority or as per the show cause notice to find out the category under which alleged short payment of Rs. 13,30,558/- was demanded. In the Page 7 of 21 Service Tax Appeal No.21353/2017 absence of any breakup, a bald allegation cannot be made that there is a short payment as held in the impugned order.
8. As regard the demand of Rs. 73,00,732/- under service availed from Associate enterprises/import of service, in the matter of M/s GSO ICP Commission and Affiliates ICP, the learned Counsel submitted that the terminology adopted by the Appellant of GSO ICP Commission is merely for the purpose of recording in the books and does not have any significance or relation to any commission activities otherwise. Moreover, the Adjudicating authority has not given any substantial finding with regard to the same. The Appellant is engaged in marketing and distribution of Apparel & Garments under the brand of Levi Strauss in India and operate through a network of distributors, franchises, since overall income is only attributed to trading activities at no stretch of imagination, it can be considered as receipt of any commission. Thus, the demand of Rs. 73,00,732/- under the above category is also unsustainable. The Learned Counsel also submitted that the above said contention was also rejected by the Adjudication authority on the ground that the Chartered Accountant (CA) certificate produced by the Appellant is cryptic and ambiguous.
9. As regards nonpayment of service tax of Rs.2,80,40,921/- on Software License Fee, Learned Counsel drew our attention to the finding in the impugned order, where the Adjudication authority held that in respect of software license and maintenance/support agreements, the parties to the contract are M/s Levi Strauss & Co., and M/s Ray Marks Expert Business System Ltd. The onus on payment of license fee both for new licenses as well as for maintenance and support is on M/s Levi Strauss & Co both in respect of company owned/operated Page 8 of 21 Service Tax Appeal No.21353/2017 stores as well as for franchises. The Learned Adjudication authority given a finding that there is no privity of contract between the franchises and M/s Ray Marks Expert Business System Ltd., and the assessee's attempt to pass as a mere collection agent for M/s Ray Marks Expert Business System Ltd., is not sustainable in law. The Learned Adjudication authority further observed that though the license fee has paid on their behalf by assessee, merely saying that the same is given to M/s Ray Marks Expert Business System Ltd., without any markup does not absolve them from the liability to pay tax. Since M/s. Ray Marks Expert Business System Ltd., has been licensed to M/s Levi Strauss and Co, the onus of discharge of service tax under reverse charge is on M/s Levi Strauss, who is the licensee. Thus, confirmed a tax liability of Rs.28,04,092/- on software license fee paid by M/s Levi Strauss & Co towards ITSS provided by M/s Ray Marks Expert Business System Ltd. In this regard, the Learned Counsel submitted that prima facie the finding is unsustainable, since the impugned order travels beyond the scope of the SCN. As per the SCN, it is alleged that the Appellant has been willing and collecting software license fee for maintenance of readymade software from their franchises in India and liable to pay service tax on same under the reverse charge mechanism. However, the Adjudication authority has taken a U-turn in the above ground and as per the finding in the impugned order, it is held that the onus of payment of license fee is on M/s Levi Strauss & Co, who is the licensee. But there is no finding that the Appellant is liable to discharge service tax. The Learned Counsel relied on the following decisions:
a. M/s IG India Ltd vs (1991 (53) E.L.T 461) Page 9 of 21 Service Tax Appeal No.21353/2017 b. M/s Aswin Vanaspathi Industries Pvt Ltd vs (1987 (27) E.L.T 300 c. M/s Universal Heat Exchangers (2000 (122) E.L.T 770
10. Learned Counsel also submitted that as per the Show Cause Notice, fee collected by the Appellant from franchises in India and the amount is not paid by Appellant to M/s Ray Marks Expert Business System Ltd., and therefore it appears that the Adjudication authority travelled beyond the scope of show cause notice and confirmed the service tax demand under Reverse Charge Mechanism (RCM) on the Appellant. The learned Counsel also drew our attention to the Annexure-15 of the agreement, where it is stated that it is the responsibility of the franchise to obtain software license at its own cost. Appellant have no privity to the arrangements of software license and maintenance charge and support fee to be paid by the franchises. The Appellant was just acting as a collecting agent and collecting such software license and maintenance support fee from the franchises in India and remitting it back to overseas entity. No invoice raised or received for collection of such remittance and no accounting entries evidencing such transaction have been made in books of account of the Appellant. Thus, even if service tax is payable for such services of maintenance, it should have been discharged by the franchise on reverse charge mechanism and not by the Appellant. The Adjudication Authority wrongly concluded that the appellant has been billing and collecting software license fee for maintenance of Raymark software from the franchise/clients. The learned counsel for the appellant also relied on the decision of this Tribunal in the matter of M/s Global Vision Cable TV Network vs CC, Cochin (2008 (9) STR 58 (Tri. Bang), wherein it is held that the appellant being an agent of this Page 10 of 21 Service Tax Appeal No.21353/2017 parent company, if collected dues on behalf of the parent company, appellant cannot be held responsible for payment of Service Tax. Thus, the finding of the Learned Adjudication authority that "though the license fee has paid on their behalf by assessee, merely saying that the same is given to M/s Ray Marks Expert Business System Ltd., without any markup does not absolve them from the liability to pay tax", is unsustainable.
11. The learned Counsel further submitted that for the subsequent period after the period covered by the impugned order, Appellant had entered into a direct agreement with M/s Ray Marks Expert Business System Ltd., for receipt of ITSS services and with franchises for provision of ITSS services. Appellant has been duly discharging service tax under reverse charge mechanism in respect of such services received from M/s Ray Marks Expert Business System Ltd. During the disputed period, there was no contract between the Appellant and M/s Ray Marks Expert Business System Ltd., or the franchise for receipt/provision of ITSS services and Appellant was not holding any technical knowhow for providing information technology software services as alleged.
12. As regards the demand of interest amounting to Rs.20,371/-, it is confirmed on the ground that the Appellant has failed to remit the tax as per the Point of Taxation Rules, 2012, Learned Counsel submitted that as per Rule 3 of POTR, 2012, point of taxation shall either be the time when the invoice for the service provided is issued. However, when the invoice is not issued within the time period specified, then in that case the point of taxation shall be the date of completion of the service or in a case when a person providing service received the payment Page 11 of 21 Service Tax Appeal No.21353/2017 before the time specified then the date of receipt of such payment. In this regard, since the Respondent failed to provide the detail breakup of the amount, which is alleged in the show cause notice, Appellant could not produce any submission to that effect. However, Appellant were paying services continuously and was paying service tax as per the agreement and discharged service tax as and when they were liable to pay within 14 days from the date of provision of IPR service.
13. As regards the service tax demanded under the category of 'Renting of Immovable Property', Learned Counsel submitted that the Adjudicating authority has erred in calculating the total service tax liability. As per the evidence available on record, the total service tax liability is only Rs. 1,77,00,220/- and not Rs.2,46,02,902/- as alleged. Out of this, service tax of Rs. 58,28,607/- was already deposited by landlords and for Rs. 10,74,075/- the amount represents rent less charged by landlords, who were not liable to register under the service tax registration, since their turnover during the impugned period was below the threshold limit prescribed in this regard. Thus, such amount cannot be recovered from the Appellant. The Learned Counsel also produced a chart evidencing details of payments and the Chartered Accountant (CA) certificate to support the same. Learned Counsel for the Appellant drew our attention to the finding of the Adjudication authority in the impugned order, where it is held that:-
3(vi) Short payment of Service Tax on Renting of Immovable Property:
"During the discussion while conducting the audit, it was revealed that the assessee has short paid service tax for Renting of Page 12 of 21 Service Tax Appeal No.21353/2017 Immovable Property Service as per the Supreme Court directions in Civil Appeal No.8390 of 2011. As per the Court's order the assessee had to deposit 50% of the total service tax liability in three equated instalments within six months, on or before 01/03/2012. As per the details provided by the assessee, their 50% service tax liability is quantified at Rs.1,22,79,239/-. During the course of audit, the assessee could produce two challans of Rs.41,00,483/- each dated 31.10.2011 and 28.12.2011 and the third challan of Rs.6,49,143/- dated 31.03.2012. But the assessee has failed to produce any challan for the payment of the remaining amount of Rs.34,29,130/-. Since the assessed has not fulfilled the Court's order, they are not eligible for the concession i.e. deposit of 50% of the service tax liability with the department. Hence the service tax liability which works out to be Rs. 2,45,58,483/- is demandable and recoverable in terms of Section 73 of the Finance Act, 1994".
14. As regards invoking the extended period of limitation, the Learned Counsel submitted that the service tax in the impugned period is for the financial year 2011 to 2012 and the show cause notice was issued on 06.04.2014. The Appellant had filed service tax returns for the period October 2011 to March 2012 on 28.05.2012. As per Section 73(1) of the Finance Act, 1994, Respondent may within 18 months from the relevant date has to issue show cause notice. It is submitted by the Appellant that normal period of limitation within which the show cause notice should have been issued by the Respondent is till November 2013. However, the show cause notice was issued in February 2014, and it is barred by limitation. Further the entire allegation was made Page 13 of 21 Service Tax Appeal No.21353/2017 based on the Audit conducted by the Department on 26.12.2012 for the period from April 2011 to March, 2012. All the documents/ information were made available to the audit team and the entire details were available to the Department. Facts being so, invoking the extended period of limitation is not proper.
15. The Learned Counsel relied on catena of decisions in support of their claim and submitted that the impugned order confirming demand beyond the normal period of limitation is unsustainable. The Learned Counsel further submitted that the Adjudication authority has only been able to superficially record a finding with regard to the provision of ITSS to franchises and ignored the documents, Chartered Accountant's certificates, agreement produced by the Appellant and termed it as a suppression on the part of Appellant. There is no substantial finding given by the respondent for invoking the extended period of limitation, though it is alleged that the Appellant had suppressed the facts regarding value of taxable service received with an intent to evade payment of service tax. Learned Counsel further submitted that as per the law laid down by Hon'ble Apex Court in the matter of M/s Anand Nishkawa Co Ltd Vs. CC Meerut (2005) TIOL-118-SC-CX, if any correct information is not disclosed deliberately to evade payment of duty and when facts are known to both the parties, omission by one to do so would not render suppression of facts. Mere failure to declare will amount not amount to wilful suppression. There must be some positive act from the side of assessee to find wilful suppression as per Section 11A of the Central Excise Act, 1994. Similarly in the matter of M/s Padmini Products Ltd Vs. CCE (1989 (43) E.L.T 195 (SC), Hon'ble Supreme Court held that in the absence of any proof of suppression of Page 14 of 21 Service Tax Appeal No.21353/2017 facts, the longer period of five year would not be applicable and the demand for the duty was sustainable only for normal period of 6 months prior to issue of SCN under Section 11A of the Central Excise and Salt Act, 1944. The Learned Counsel further submitted that the issue involved is legal interpretation and when there is a conflicting view of the various judicial forums on the said issue, extended period of limitation cannot be invoked. The Learned Counsel relied on following judgments/ decisions: -
i. M/s Hero Moto Corp Ltd., Vs. CC (2014 (302) E.L.T 501 (Del) ii. M/s PP Products Ltd., Vs CC, Chennai (2019 (367) E.L.T 707 (Mad) iii. M/s Titan Industries Vs. CC, Bangalore (2006 (194) E.L.T 38 (Tri.Bang) iv. CCE Vs. M/s IFB Industries (2019 (5) TMI 1014-
CESTAT MUMBAI) v. M/s Delta Power Solutions Vs. CCE & ST (2021 (11) TMI 174-CESTAT NEW DELHI vi. CC Vs. M/s Spice Jet Ltd (2023 (79) GSTL 271 (Tri.
Del) vii. M/s Aban Loyd Chiles Offshore Ltd., Vs. CC, Maharashtra (2006 (200) E.L.T 370 (S.C) viii. M/s Elpro International Ltd., Vs. Collector of Central Excise, Pune (2002 (149) E.L.T 1383 (Tri. Bang) ix. M/s Motorola India Pvt. Ltd., Vs. CC (Air), Chennai (2009 (237) E.L.T 731 (Tri. Chennai) x. M/s Shah Alloys Ltd., Vs. CC, Kandla (2000 (236) E.L.T 651 (Tri. Ahmd.) CCE Vs. Punjab Chem & Pharma (2001 (135) E.L.T 227) xi. M/s Asia Automotive Ltd., Vs. CCE (1999 (113) E.L.T
841) xii. M/s Haryana Co-op Sugar Vs. State (1997 (107) STC
103) Page 15 of 21 Service Tax Appeal No.21353/2017 xiii. M/s Indian & Eastern Newspaper Vs. CIT (1979 (4) SCC 248) xiv. M/s Bharat Agriculture & Mechanical Engg Co Vs. State of Bihar (2008 (148) STC 372 (Patna) xv. CCE Vs. M/s Swaroop Chemicals P Ltd (2006 (204) E.L.T 492 xvi. M/s Haldia Petrochemicals Ltd., Vs. CCE (2006 (197) E.L.T 97 xvii. CCE Vs. M/s Telco Ltd (2006 (196) E.L.T 308 (T) xviii. M/s Birla Corporation Ltd., V. CCE (2002 (148) E.L.T 1249 (T)
16. The learned Authorised Representative (AR) for the Revenue reiterated the findings in the impugned orders and further submitted that the Deed entered by the overseas entity as holding major share of 88% is not merely profit sharing but the consideration for using the Trademarks owned by them and it is classifiable under the category of 'Intellectual Property Right' services and adjudicating authority rightly confirmed the demand.
17. Heard both sides and perused the records.
18. We find that as regards invoking the extended period of limitation, though it is alleged that the Appellant had suppressed the facts regarding value of taxable service received with intent to evade payment of service tax, there is no substantial finding given by Adjudication Authority for invoking the extended period of limitation. As per the law laid down by Hon'ble Apex Court in the matter of M/s Anand Nishkawa Co Ltd Vs. CC Meerut (2005) TIOL-118-SC-CX, if correct information is not disclosed deliberately to evade payment of duty and when facts are known to both the parties, omission by one to do so be would not render suppression of facts. Mere failure to declare will not amounts to wilful suppression. There must be some positive act Page 16 of 21 Service Tax Appeal No.21353/2017 from the side of assessee to find wilful suppression as per Section 11A of the Central Excise Act, 1994. Thus, the impugned order confirming demand beyond the normal period of limitation is unsustainable.
18. As regards nonpayment of service tax of Rs. 1,01,6,502/- under 'sponsorship' services, as per the details furnished by the Appellant, it is evident that major part of the expenses are spent for different services and without considering the nature of service and payment of service tax made by service provider, they was clubbed together to demand service tax under section 68(2) of Finance Act, 1994 by classifying the service as 'Sponsorship' services. The appellant produced sufficient evidence to prove that the consideration for demanding said amount under 'sponsorship; services has been arrived without considering the details of expenses as explained in ibid, paras. Since, the actual amount of sponsorship fee is only Rs. 2,15,55,828/- and considering the fact that the appellant had discharged their liability on the said amount on Reverse Charge basis, service tax of Rs. 1,01,6,502/- demanded as per the impugned order under 'Sponsorship' services is unsustainable.
19. As regards demand of Rs. 13,30,558/- on inter company management/service expenses shared with parent company, the appellant produced the challan evidencing payment of service tax of Rs. 2,23,79,555/- on a consideration of Rs.21,66,08,189/- against various services on inter company management/service expenses shared with the parent company. As regards demand of Rs. 13,30,558/- there are no details furnished by the Adjudication authority or as per the SCN to find out the category under which alleged short payment of Rs. 13,30,558/- was demanded. In the absence of any specific Page 17 of 21 Service Tax Appeal No.21353/2017 allegation, no finding can be made that there is a short payment as held in the impugned order. Thus, the said demand is also unsustainable.
20. As regards the demand of interest of Rs.20,371/- alleging failure to remit the tax as per the Point of Taxation Rules, 2012, we find that since the detail breakup of the amount is not specified in the SCN, Appellant could not produce any submission to that effect. Considering the fact that the Appellant were paying service tax continuously and discharged huge amount of service tax under different categories as and when they were liable to pay, demand of interest of Rs.20,371/- without specifying the detailed breakup of the amount is unsustainable.
21. As regards demand of Rs. 2,45,58,483/- under 'Renting of Immovable Property', issue was settled as per the order of Hon'ble Supreme Court. As per the evidence produced by the appellant including the certificate issued by Chartered Accountant, the total service tax liability is only Rs. 1,77,00,220/- and not Rs.2,46,02,902/- as alleged. Out of this, service tax of Rs. 58,28,607/- was already deposited by landlords and for Rs.10,74,075/-, the appellant claims that the amount represents rent less charged by landlords, who were not liable to register under the service tax registration, since their turnover during the impugned period was below the threshold limit prescribed in this regard. However, Adjudication Authority confirmed higher amount on the ground that during the course of audit the assessee could produce only two challans of Rs.41,00,483/- each dated 31.10.2011 and 28.12.2011 and the third challan of Rs.6,49,143/- dated 31.03.2012. But the assessee has failed to produce any challan for the payment of the remaining amount of Rs.34,29,130/-. Since the assessed has not fulfilled the Court's order, they are not eligible for the Page 18 of 21 Service Tax Appeal No.21353/2017 concession i.e. deposit of 50% of the service tax liability with the department. Hence Adjudication Authority confirmed Service Tax of Rs. 2,45,58,483/- under the above head. We find that there is an omission on the part of appellant and as well as Adjudication Authority to appreciate the facts in right perception. Once the amount is settled as per the order of the Hon'ble Supreme Court, it is not proper to re-open the issue and confirm Service Tax of Rs. 2,45,58,483/-on the ground that there is no evidence produced by the appellant regarding payment of remaining amount of Rs.34,29,130/-. If there is failure on the part of appellant to produce sufficient evidence regarding payment of entire amount as directed by Hon'ble Supreme Court, only the due amount can be confirmed with interest. If the issue is re-opened as done by the Adjudication Authority, the Adjudication Authority is bound to consider the ground raise by the appellant regarding liability to pay service tax as per the law settled by the appellate authorities and by considering the ground raised by the appellant whether the amount short paid by the appellant represents rent less charged by landlords, who were not liable to register under the service tax registration, since their turn over during the impugned period was below the threshold limit prescribed in this regard. The facts can be considered only by the adjudication Authority on the above directions after extending reasonable opportunity for adducing evidence regarding the payment of service tax.
22. As regards demand of Rs. 73,00,732/- on import of services availed from associate enterprises, we find strong force on the submission made by the appellant that the overall income is only attributed to trading activity and same cannot be considered as receipt Page 19 of 21 Service Tax Appeal No.21353/2017 of any commission. However, the details can be verified only after verifying the records produced by the appellant. Hence issue is remanded to adjudication authority for considering the documents /evidence relied by the appellant and to find out the demand for normal period, if any payable by the appellant.
23. As regards non-payment of service tax of Rs.2,80,40,921/- on software license fee, as per the software license and maintenance/support agreement produced by the appellant, no conclusion can be made that the onus for payment of license fee both for new licenses as well as for maintenance and support is on M/s Levi Strauss & Co., both in respect of company owned/operated stores as well as for franchises as held by Adjudication Authority. The issue can be settled only on careful consideration of the role of the appellant whether they acted as pure agent of the parent company as claimed by the appellant. Hence, Adjudication Authority is directed to verify the contract and the role played by the appellant in providing software license during the relevant period in the De-novo Adjudication.
24. In view of the above discussion and considering the above facts, the impugned order confirming demand beyond the normal period of limitation is unsustainable. Penalties imposed by adjudication authority are also set aside. Further the demand confirmed on 'Sponsorship' services under Reverse Charge Mechanism (RCM) is set aside. Regarding demand under renting of immovable services, service tax demand of Rs. 2,45,58,483/- is set aside, since the amount is settled as per the order of the Hon'ble Supreme Court, appellant shall produce evidence regarding payment of remaining amount of Rs.34,29,130/- and in case the appellant fails to produce sufficient evidence regarding Page 20 of 21 Service Tax Appeal No.21353/2017 payment of entire amount as directed by the Hon'ble Supreme Court, appellant is liable to pay balance amount with interest from the date of order issued by Hon'ble Supreme Court. As regarding other services, the demands as per impugned order is set aside and appeal is remanded to adjudication authority to conduct de-novo adjudication as per the above finding for the normal period.
25. During the de-nova proceedings, in case the Adjudication authority has reason to direct for fresh Chartered Accountant (CA) certificate, the appellant shall produce the same after due verification of their records by the Chartered Accountant (CA). The De-novo proceedings should be completed within 3(three) months after the receipt of fresh Chartered Accountant (CA) certificate, after extending a reasonable opportunity for personal hearing to the appellant.
26. The appeal is disposed in the above terms.
(Order Pronounced in Open court on 22.10.2024) (P.A. Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) sasidhar Page 21 of 21