Custom, Excise & Service Tax Tribunal
Ms Huawei Telecommunication India Co ... vs Rohtak on 29 April, 2025
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 61636 of 2018
[Arising out of Order-in-Original No.05-06/ST/COMMR/VMJ/RTK/2018-19 dated
14.06.2018 passed by the Commissioner of CGST, Rohtak]
M/s Huawei Telecommunication India ......Appellant
Co. Private Limited
7th Floor, Tower-A, Spaze-I, China Park, Sohna
Road, Sector-49, Gurgaon, Haryana-122001
VERSUS
Commissioner of Central Excise and ......Respondent
Service Tax, Rohtak SCO No.6 to 8 & 10, Sector-1, HUDA Market, Rohtak, Haryana-124001 WITH Service Tax Appeal No. 60160 of 2020 [Arising out of Order-in-Original No. GGM/Com/Adj./Huawei/27/2019-20 dated 08.01.2020 passed by the Commissioner of CGST, Rohtak] M/s Huawei Telecommunication India ......Appellant Co. Private Limited 7th Floor, Tower-A, Spaze-I, China Park, Sohna Road, Sector-49, Gurgaon, Haryana-122001 VERSUS Commissioner of Central Excise and ......Respondent Service Tax, Rohtak SCO No.6 to 8 & 10, Sector-1, HUDA Market, Rohtak, Haryana-124001 APPEARANCE:
Shri Tarun Gulati, Shri Kishore Kunal and Ms. Runjun Pare and Shri Jayesh Sitlani, Advocates for the Appellant Shri Shyam Raj Prasad (Special Counsel), Authorized Representative for the Respondent 2 ST/61636/2018 & 02 others AND Service Tax Appeal No. 61696 of 2018 [Arising out of Order-in-Original No. 05-06/ST/COMMR/VM/RTK/2018-19 dated 14.06.2018 passed by the Commissioner of CGST, Rohtak, Haryana] Commissioner of Central Excise and ......Appellant Service Tax, Gurgaon-I Plot No.36 & 37, Sector-32, Gurgaon, Haryana-122001 VERSUS M/s Huawei Telecommunication India ......Respondent Co. Private Limited 7th Floor, Tower-A, Spaze-I, China Park, Sohna Road, Sector-49, Gurgaon, Haryana-122001 APPEARANCE:
Shri Shyam Raj Prasad (Special Counsel), Authorized Representative for the Appellant Shri Tarun Gulati, Shri Kishore Kunal and Ms. Runjun Pare and Shri Jayesh Sitlani, Advocates for the Respondent CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO.60508-60510/2025 DATE OF HEARING: 05.02.2025 DATE OF DECISION: 29.04.2025 P. ANJANI KUMAR:
M/s. Huawei Telecommunications India Co. Private Limited (the Appellant in ST/61636/2018 & ST/60160/2020 and Respondent in ST/61696/2018) are engaged in providing services of erection, commissioning and installation services, Works contract service, 3 ST/61636/2018 & 02 others Maintenance & repair services, Business Support service, Commercial training & coaching service, Market research agency, Management Consultants, Manpower Recruitment agency, Storage & Warehousing service, Technical Inspection & Certification, GTA, and Sponsorship service etc. and are registered with Service Tax Department.
Revenue got the audit of the records of the appellant, conducted by a special auditor, M/s Gianender & Associates, under Section 72A of the Finance Act,1994; On the basis of Scrutiny of the Records, it appeared to the department that the appellant evaded payment of service Tax, on various services, as below.
Category of service Amount Remarks
Management or Business 3,66,07,637 Expenses incurred under
Consultancy Services received project management service
from outside India in favour of M/s. Huawei
2011-12 Technology Limited, China
Market Research Agency 11,92,94,464 Appellant paid service tax
Services claimed as Export of under Business Auxiliary
Service (2010-11to 2011-12) Service and claimed
rebate/refund erroneously
whereas the said services
were falling under Market
Research Agency service
Banking and other Financial 10,69,70,856 M/s. Huawei Tech gave
Services under RCM- (SHOW corporate guarantee on
Corporate Guarantee given by CAUSE behalf of the appellant which
M/s. The Overseas Associate NOTICE falls under Banking & other
Enterprises to Banks on behalf dated Financial Services up to June
of appellant 22.01.2016) 2012 and thereafter taxable
(2010-11 to 2014-15) service w.e.f. 01.07.2012
and was taxable under RCM
Short payment on account of 6,75,40,376
reconciliation of accounts
relating to Erection
Commissioning and
Installation Service
(2010-11 to 2011-12)
4 ST/61636/2018 & 02 others
Short payment under Erection 52,10,01,846
Commissioning and
Installation Service
(2011-12)
Wrong availment of Cenvat 1,56,959
Credit on Rent a Cab service
and Event Management
Services (2011-12)
Double availment of Cenvat 82,82,930 SHOW CAUSE NOTICE
Credit on input service proposed to appropriate said
invoices amount along with interest
1(2010-11) already paid by the appellant
Short payment of service tax 75,664 Amount of Service Tax along
under RCM on import of with Rs. 23,172/- paid by
services (2011-12) the appellant but penalty
under Section 78 not paid
Non-payment of service tax 3,60,500 Appellant paid the service
under RCM on expenses for tax amount along with
Sponsorship services (2011- interest Rs. 1,07,451/- but
12) not paid penalty under
section 78
Short payment of service tax 5,59,344 Appellant paid the service
under Erection Commissioning tax amount along with
and Installation Service interest Rs. 2,34,458/- but
(2010-11 to 2011-12) not paid penalty under
section 78
2. On conclusion of the investigation, a Show Cause Notice, dated 22.01.2016, covering period from 2010-11 to 2013-14, was issued to the appellant, invoking extended period and seeking to confirm the demands with interest while proposing to levy penalties under section 76, 77 & 78 of the Finance Act,1994 read with Rule 15 of CCR 2004. Further, another Show Cause Notice, dated 19.04.2016, was also issued for demanding service tax of Rs. 3,96,38,520/-, for the period 2014-15, under Banking & other Financial Service payable under Reverse Charge Mechanism, for Corporate Guarantee obtained from their Overseas Associate. Learned Commissioner, vide common 5 ST/61636/2018 & 02 others impugned Order-in-Original, dated 14.06.2018, partly dropping and partly confirming the demands raised along with imposition of interest and penalty. The order summarized in respect of Show Cause Notice dated22.01.2016 is as follows.
Category of Amount of Order in OIO
service Service Tax
demanded
Management or 3,66,07,637 Dropped the demand holding that the
Business Consultancy services provided by Huawei, China in
Services received Nepal falls under Erection,
from outside India Commissioning or Installation service and
2011-12 not under Management or Business
Consultancy Services as alleged in the
SHOW CAUSE NOTICE.
Market Research 11,92,94,464 confirmed the allegation of SHOW
Agency Services CAUSE NOTICE and ordered for recovery
claimed as Export of of erroneously sanctioned rebate/refund
Service (2010-11to under proviso to section 73(1) along with
2011-12) interest and equal penalty under section
78 of the Act.
Banking and other 10,69,70,856 confirmed the demand of service tax
Financial Services (SHOW CAUSE along with interest and penalty of Rs.
under RCM-Corporate NOTICE dated 39,63,852/- under section 76 (for SHOW
Guarantee given by 22.01.2016) CAUSE NOTICE dated 19.04.2016) &
M/s. The Overseas equal penalty of Rs. 10,69,70,856/-
Associate Enterprises under section 78 (for SHOW CAUSE
to Banks on behalf of NOTICE dated 22.01.2016) and Rs.
appellant 10,000/- under section 77 for SHOW
(2010-11 to 2014-15) CAUSE NOTICE dated 19.04.2016.
Short payment on 6,75,40,376 Dropped the demands on the basis of
account of reconciliation submitted by the appellant
reconciliation of during adjudication
accounts relating to
Erection
Commissioning and
Installation Service
(2010-11 to 2011-12)
Short payment under 52,10,01,846 Confirmed the demand of Rs.
Erection 35,41,833/- out of total demand of Rs.
Commissioning and 52,10,01,846/- after reconciling the
Installation Service entries submitted by the appellant.
(2011-12) Interest & equal penalty under section 78
of the Act imposed on the confirmed
demand.
6 ST/61636/2018 & 02 others
Wrong availment of 1,56,959 Demand confirmed and appropriated.
Cenvat Credit on Rent Demand of interest and equal penalty
a Cab service and imposed under section 78 read with Rule
Event Management 15 of CCR, 2004
Services (2011-12)
Double availment of 82,82,930 Confirmed along with interest and the
Cenvat Credit on amount paid already appropriated.
input service invoices
( 2010-11) In addition, general penalty of Rs.
10,000/- under section 77 has also been
Short payment of 75,664
imposed.
service tax under
RCM on import of
services (2011-12)
Non-payment of 3,60,500
service tax under
RCM on expenses for
Sponsorship services
(2011-12)
Short payment of 5,59,344
service tax under
Erection
Commissioning and
Installation Service
(2010-11 to 2011-12)
2.1. In respect of the Show Cause Notice, dated 19.04.2016, learned Commissioner confirmed the demand of service Tax of Rs. 3,96,38,520/-, for the period 2014-15, under Banking & other Financial Service payable under Reverse Charge Mechanism, with interest and penalty. Appellant filed the appeal No. ST/61636/2018 against the demands confirmed, vide common OIO dated 14.06.2018. Revenue filed an appeal No. ST/61696/2018 against the dropping of demands of service tax of Rs. 3,66,07,637/- on 'Management or Business Consultation Service' and dropping of demand of Rs. 6,75,40,376/- on account of reconciliation of accounts under 'Erection, Commissioning and Installation service'.
7 ST/61636/2018 & 02 others 2.2. Further, another periodical Show Cause Notice, dated 18.04.2019, was issued for demand of service tax on the issue of Corporate Guarantee for the period from 2016-17 to 2017-18 (up to June 2017). Commissioner, vide Order-in-Original, dated 08.01.2020, confirmed the demand of service tax of Rs 2,92,14,000/- along with interest and penalty of Rs. 50,00,000 under Section 76 and a penalty of Rs. 10000 under section 77 of the Act. Being aggrieved, the appellant has filed appeal No. ST/60160/2020.
3. Shri Tarun Gulati, Learned Senior counsel for the appellants submits that Appeals Nos. ST/61636/2018 (by assessee ) and No. ST/61696/2018 (by Department's Appeal) are against common Impugned Order dated 14.06.2018, vide which, Learned Commissioner rejected the appellant's claim of export Business Auxiliary Services, confirmed demand on account of corporate guarantee services received from overseas associated enterprises and irregular availment of Cenvat Credit along with interest and penalties but dropped demand on account of alleged import of "Management or Business Consultancy Service" and alleged differences on re- conciliation between financial statements and ST-3 returns; Appeal No. ST/60160/2020 (by the appellant) was filed against Order dated 08.01.2020, wherein demand on corporate guarantees, for subsequent period, was confirmed. He submitted specific details of demand and amounts are captured in the Basic Facts Chart.
8 ST/61636/2018 & 02 others
4. Learned Senior Counsel submits on each of the issues involved as follows.
Demand Dropped under "Management or Business Consultancy Service:
4.1. He submits that learned Commissioner has rightly dropped the demand of Rs. 3,66,7637, for the period 2010-11 to 2013-14, on the ground that the service provider, Huawei, China was entrusted with installation of mobile network system and not to render any kind of advice or consultancy only; therefore, it was rightly held that the services are "Erection, Commissioning and Installation Services"
("ECIS") under Section 65(105)(zzd) of the Finance Act, 1994; the subject services were performed by a foreign entity in foreign on behalf of the Assessee is not taxable in terms of Rule 3(iii) of the Taxation of Services (Provided from Outside India and received in India) Rules, 2006.; he relies on Oil and Natural Gas Corp Ltd., 2017 (6) GSTL (Mum).
4.2. Learned Counsel submits further that the respondent Department has challenged the Impugned Order on the ground that as per Note 37(B) to financial statements of Balance Sheet, the Assessee has incurred expenses under Project Management Services; description in the invoices for the subject services is "Network Rollout Services" and not "Erection Commissioning and Installation Services"; on examination of the Agreement dated 09.10.2010, it appears that ECIS is only a part of the series of activity required for network rollout services; value of Network rollout services was more than 80% of total value of services. Learned Counsel counters the 9 ST/61636/2018 & 02 others department's stand stating that the services are not in the nature of Project Management services rather the same are in the nature of 'Erection, commissioning and Installation Services' rendered outside India; clause 1.1 of the sub-contract agreement dated 09.10.2010, as well as certification from Huawei, China, it is evident that the services are of installation of telecom equipment and in no way related to mere management or consultancy of any project.; no advice or consultancy is rendered by Huawei, China; this fact remains undisputed even in the Grounds of Appeal of the Department; when the services involved are in the nature of actual performance of the work, the same cannot be treated as any advice or consultancy; he relies on CBEC Circular dated 27.06.2001 and M/s Sugar Mills Co. Ltd., 2012 (25) STR J154 (SC), wherein it is held that delegation of entire operation does not amount to merely rendering an advise or consultancy; the terminology used in financial statements and invoices cannot be solely considered for determining classification as held in ONGC Ltd - 2017 (6) GSTL 537 (Tri. Mumbai); British Physical Laboratories (1) Ltd 1999 (107) ELT 107 (Tri); Basti Sugar Mills Co. 2007 (7) STR 431 (Tri Del.) and 2012 (25) STR H154 (SC); Merti Trac Services Pvt Ltd - (2023) 10 Centax 74 (Tri. Bang.); Daelim Industrial Co. Ltd - 2003 (155) ELT 457 (Tri. Del.) and 2007 (5) STR J99 (SC) and TGL Poshak Corporation- 2002 (140) ELT 187 (Tri- Chennai).
Service Tax demand of Rebate Claimed under "Market Research Agency" services 10 ST/61636/2018 & 02 others
5. Learned Senior Counsel submits that Learned Commissioner Confirmed demand of ₹ 11,92,94,464/-along with equivalent penalty and interest, for the period, December 2010-March, 2011 on the grounds that the subject services appear to be MRAS as the Assessee is supposed to explore the market for overseas entity and such activities fall under MRAS; rebate order dated 26.12.2013) is erroneous and the rebate granted is liable to be recovered; the Assessee classified services under MRAS till March, 2010 and thereafter changed the classification to BAS. He submits that the impugned order merely relied on few obligations under the agreement and did not consider all the obligations; on a reading of the obligations in Para 3.2 of the Service Agreement dated 01.04.2009, it is evident that the services are provided in relation to promotion of goods belonging to Huawei, China/Singapore, evaluation and development of prospective customers and customer care services, thus, classifiable under BAS; similar activities have been held to qualify to be covered under BAS in Microsoft Corporation India Pvt Ltd 2014 (36) STR 766 (Tri-Del), Kesar Products Ltd, 2014 (33) S.T.R. 646 (Tri. Mumbai) and J.J. Foam Pvt Ltd. vs. CCE, Ghaziabad, 2014 (35) STR 792.
5.1. Learned Senior Counsel submits that the scope of MRAS is limited to market research of product/ service; however, the Assessee provided brand promotion, business support services and acted as conduit between customers and Huawei China/ Singapore; the services were partially provided outside India as the report was sent outside India to China/ Singapore; hence, the services qualify as 11 ST/61636/2018 & 02 others export; it was held in the following cases that even in case of Market Research, where benefit of the research is used by a customer situated outside India in its business, the same will be treated to have been performed outside India and thus, amounting to export. M/s. Medallion Consulting Pvt Ltd 2017 (4) GSTL 98 (Tri-Del) B.A. Research India Ltd., 2010 (18) STR 439 (Tri. -Ahmd.) Misys Software Solutions India Pvt Ltd., 2017 SCC CESTAT 2135 Glaxo SmithKline Asia, (2024) 15 Centax 307 (Tri. -Chan). 5.2. Learned Senior Counsel submits further that once the refund sanctioning authority had granted refund of service tax by Order dated 26.12.2013 and no appeal was filed against such order, the said order has attained finality as held in Eveready Industries India Ltd 2016 (337) ELT 189 (Mad.) and BT (India) Pvt Ltd (2023) 13 Centax 89.
Service Tax on the commission payable on corporate guarantee received from the overseas associated enterprise (Appeal No ST/ 61636/2018 and ST/60160/2020)
6. Learned Senior Counsel submits that the Impugned Orders confirmed demand of Rs 4,66,09,376 and 2,92,14,000 along with interest and penalty, for the period December 2010-March, 2014, on the ground that the term banking and other financial services in Section 65(12) encompasses various services including bank guarantee; Function of bank guarantee is akin to corporate guarantee; the activity/transaction involves benefits to Huawei and in 12 ST/61636/2018 & 02 others the absence of this activity/transaction, it would have incurred certain costs and the value of consideration was determined @ 2% of the guaranteed amount relying on the Safe Harbour Rules. 6.1. Learned Senior Counsel submits also that there is no service nor any consideration involved in cases where corporate guarantee is provided by the associated enterprises to the banks for working capital related loans required; it is held in a number of cases that no Service Tax, under the category of banking and other financial services, can be demanded on Corporate Guarantee provided by Associated Enterprise by the Assessee and that there is no provision under the Finance Act, 1944 to impose any notional value on services; he relies on DLF Home Developers Ltd 2023 SCC Online CESTAT 962 Jindal Stainless Steel, Final Order No. 60169/2023 Edelweiss Financial Services Ltd., (2023) 5 Centax 57 (Tri. Bom.) and 2023 (73) GSTL 4 SC Sterlite Industries India Ltd 2019 (25) GSTL 277 Sowar Pvt Ltd (2023) 7 Centax 84.
Komatsy India Pvt Ltd - 2022 (67) GSTL 97 (Tri. Mad.) Allegation of Short payment of Service Tax on reconciliation of balance sheets with ST-3 returns
7. Learned Senior Counsel submits that an amount of Rs. 35,41,833 was confirmed out of the total demand of Rs. 52,10,01,846 and the rest was dropped; commissioner correctly finds that the Appellant had erroneously credited the service tax liability account twice to the 13 ST/61636/2018 & 02 others extent of Rs. 21,56,45,734; the same was rectified by passing reversal entry in FY 20 11-12; the above fact has been certified by Chartered Accountant certificate dated 14.04.2018; the demand to that extent is liable to be dropped; revenue is in appeal on the ground that no adequate proof was submitted by the Assessee. 7.1. Learned Senior Counsel submits further that commissioner's finding is based on correct re-conciliation provided; applicable Service Tax was discharged on receipt basis as against the erroneous demand raised on accruals in the financial years; demand confirmed of Rs. 35,41,833 was not justified; however, the appellant accepted the demand and deposited the same along with applicable interest and penalty totalling to Rs. 67,48,987.
Demand in respect of Rent-a-Cab Services and Event Management Services.
8. Learned Senior Counsel submits that the appellant deposited the entire demand of Rs. 1,56,959/- on 15.01.2014 before issuance of Show Cause Notice; commissioner holds that the appellant is liable for interest under Section 75 and penalty under Section 78; Rule 14 of the Cenvat Credit Rules was subsequently amended by Finance Act. 2012 as per which interest is levied in case where the Cenvat Credit has been availed as well as utilised wrongly; in the present case, the Cenvat credit was not utilised; he relies on M/s Strategic Engineering (P) Ltd 2014 (310) ELT 509.
Double availment of CENVAT credit on input services; Time Bar; Penalties etc 14 ST/61636/2018 & 02 others
9. Learned Senior Counsel submits further that the appellant has paid of Rs. 92,78,438 towards Service Tax liability along with interest of Rs. 44,82,945, on the double availment of Cenvat credit and Service Tax liability on various other services; impugned order appropriates the same and imposes penalty of equivalent amount; the appellant has not committed any positive act in order to wrongfully avail Cenvat Credit; moreover, the amount of demand was paid along with interest before Issuance of Show Cause Notice; as held in Bio Med Health Care Products 2015 (37) STR 381 (Tri.- Delhi) and DLF Home (supra) no show cause notice is required to be issued under Section 73(1) of the Finance Act, 1994, in terms of Section 73(3), where the Assessee pays the service tax; no penalty is imposable. He relies on Chemphar Drugs and Liniments, 1989 (40) ELT 276 (SC) Hindustan Steel 1978 (2) ELT J159 (SC) Pushpam Pharmaceuticals Company 1995 (78) ELT 401 (S.C.) Anand Nishikawa Go. Ltd, Vs CCE, Meerut, 2005 (188) ELT 149 (SC) Cosmic Dye Chemical Vs CCE, Bombay, 1995 (75) ELT 721 (SC) 9.1. Learned Counsel for the appellants submits that no penalty is imposable on Cenvat credit of Rs 1,56,959 reversed without actual utilization at the time of audit itself and prior to issuance of the Show Cause Notice; no ingredients such as suppression, fraud, mis- statement etc are established on their part as they filed returns regularly; He relies on Thyssenkrupp Electrical Steel India Pvt. Ltd 2017 (48) STR 81 (Tri.
Mumbai) Ashok Metal Decor (P) Ltd., 2011 (21) STR 469 (All.), Reliance Petroproducts Pvt. Ltd. (2010) 11 SCC 762 Kisan Sahkari Chini Mills Ltd., 2012 SCC Online All 3143.
15 ST/61636/2018 & 02 others Bio-Med Health Care Products Pvt Ltd 2015 (37) STR 381 (Tri. Delhi).
10. Shri Shyam Raj Prasad, Special Counsel, on behalf of the Respondent Department, reiterates the findings of the OIO as far as the Appeals by M/s Huawei are concerned and grounds of appeal in respect of the department's appeal. He submits that adjudicating authority has applied his mind and considered all the detailed submissions made by the appellant during the adjudicating proceedings and has decided the case on merit duly considering the facts and relevant legal provisions etc. Commenting on the averment of the appellant that the Respondent did not have any jurisdiction to adjudicate the SHOW CAUSE NOTICE and pass the impugned Order as the CGST Act, 2017, he submits that there is a saving clause in GST Act to the effect that all action taken under the erstwhile Finance Act, 1994 shall be valid; clause (1)(e) of section 174 of the CGST Act is a savings clause for continuing with, amongst others, assessment proceedings, adjudication or any other legal proceeding initiated/to be initiated under the repealed Acts; the position has been accepted by various Courts & Tribunals; he relies on the decision of Hon'ble High Court of Guwahati in the case of Laxmi Narayan Sahu 2018 (19) G.S.T.L. 626 (Gau.) Submissions on claim of the appellants that the services provided by them qualify as business auxiliary service (BAS)
11. Learned Special Counsel takes us through various clauses of the agreement, CBEC Letter No. 11/3/98-TRU dated 07.10.1998 and 16 ST/61636/2018 & 02 others submits that it may be noticed from the key features of the two agreements that though the wordings have changed in the agreement of 2009, yet the nature of the major and significant services undertaken by the appellant viz. "providing information on customers", "Liaising with customers for obtaining inquiries or feedback or correspondence concerning the products", "development of market plan or providing information related to Indian market, customers, vendors etc" did not change even after April 2009; the said activities majorly fall under the category of MRAS and not under BAS as per the definition of MRAS contained in section 65(69) of the Act; it is undisputed on record that the appellant classified the services provided under the said agreement as MRAS till March 2010 and thereafter they unilaterally changed the classification of the same service to BAS; Section 65A of the Finance Act, 1994, provides that when for any reason, a taxable service is prima facie, classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected under the sub-clause which provides the most specific description and not the sub-clauses that provide a more general description. He relies on MD Pvt ltd 2017 (51) STR 333 (T-Del), Kopran Ltd 2011 (23) STR 627 (T-Mum) and Kotak Securities Ltd 2013 (32) STR 705 (T-Mum, in support of classification under MRAS in the facts and circumstances of the case in hand. He submits that the cases of Doypack Systems Pvt. Ltd (supra)and M/s. Microsoft Corporation India Pvt Ltd (supra) relied upon by the appellant do not support their contention as those are not relevant being distinguishable on facts and circumstances.
17 ST/61636/2018 & 02 others On the claim of the appellant that SHOW CAUSE NOTICE is vague
12. Learned Special Counsel submits that the SHOW CAUSE NOTICE as well as the impugned order have considered the various clauses of the agreements, past practice followed by the appellant regarding classification and has alleged or held the case on merit duly considering the facts and relevant legal provisions etc; the charges in the SHOW CAUSE NOTICE are specific and clearly brought out with supporting legal authority and justification and hence, the same cannot be said to be vague; appellants reliance on H.P.L. Chemicals vs. CCE, 2006 (197) ELT 324 (SC), Metal Forgings vs. UOI 2OO2 (146) ELT 241 (SC) and Amrit Foods vs. CCE, U.P. 2005 (190) ELT 433 (SC), is not valid as the cases are distinguishable from the present case.
13. Learned special Counsel submits that the SHOW CAUSE NOTICE has elaborately discussed as to why the provision of MRAS to Huawei China/Singapore cannot be treated as "export of service" as it is being provided in India and the said service falls under the category of Rule 3(1)(ii) of ESR; no evidence has been produced to that they were sending market survey report abroad; alternate plea of the appellant has not been considered by the Commissioner as the same was not submitted before him; the same is not acceptable at this stage being an additional ground; even otherwise, the entire service of MRAS is being provided in India and merely by sending report to China/ Singapore, the same cannot fall under the category of export 18 ST/61636/2018 & 02 others of service as claimed by the appellant; the case of Medallion Consulting relied upon by the appellant is based on facts which are not relevant to the case in hand and the appellant has not brought any evidence on record any report on market research sent to their service recipients; he relies on Alnoori Tobacco Products 2004 (170) ELT 135 (SC), Srikumar Agencies 2008 (232) ELT 577 (SC) and Allied Airconditioning Corporation 2006 (202) ELT 209 (SC) and submits that cases with no comparable facts cannot be relied upon. On the submission that refund cannot be demanded back without appealing against the order sanctioning refund.
14. Learned Special Counsel submits that this plea was also not raised before the adjudicating authority, as the same has not been addressed in the impugned order. Hence, its being an additional ground, which was not adjudicated at lower level cannot be allowed to be presented before Tribunal as per settled law; cases relied upon by the appellant were examined critically by the Hon'ble High Court of Bombay in an identical facts and circumstances as is involved in the instant case, and held in case of Indian Dyestuff Industries Ltd vs UOI 2003 (161) ELT 12 (Bom.) and it was held that the issue of refund had attained finality and there were no grounds to invoke jurisdiction under Section 11A of the Act; the case affirmed by Hon'ble Supreme Court 2004 (163) ELT A56 (SC) and was followed in Bharat Box Factory Ltd 2005 (183) ELT 461 (T-Del) and in Maize Products 2004 (167) ELT 174 (Tribunal); TVS Motor Co. Ltd - 2017 (5) GSTL 85 (Tri. Bang.); Santec Exim Pvt Ltd - 2019 (370) ELT 1664 (Tri. Del.); TLF 19 ST/61636/2018 & 02 others Quin India Pvt Ltd - 2016 (339) ELT 129 (Tri. Hyd.); SK Timber Company - 2021 (377) ELT 454 (Tri. Kolkata); Doothat Tea Estate Kanoi Plantation (P) Ltd - 2001 (135) ELT 386 (Tri. Cal.) the provisions of section 73 of the Act are pari materia to the provisions of section 11A of Central Excise Act, 1944 and hence the ratio of the aforesaid cases is squarely applicable to the facts of this case. On Applicability of Service tax is on the corporate guarantee prior to July 2012 as well as from July 2012
15. Learned Special Counsel submits that the appellant stated that they had availed working capital loans from various lenders in India and in order to secure the loans, the Appellant obtained a Corporate guarantee from Huawei Tech, without any consideration; as Huawei Tech does not qualify as a Banking company or a Financial institution, the service does not fall under BOFS as per definition; further, Huawei Tech does not fall under the category of a body corporate or commercial concern and they relied on Circular No. 83/1/2006-5.T., dated 04.07.2006; they rely on the cases of Mega Enterprises 2015 (40) STR 528 (Tri. Mumbai), Subhash Chandar Nishat 1979 (4) ELT (J212) (Bom.) and Sterlite industries Ltd 2014 (351STR 849 (Tri. Chennai) for elaboration of the word 'namely'; w.e.f. 01.07.2012, as there was no consideration agreed to be paid by the Appellant to Huawei Tech, it cannot be held to be taxable service. 15.1. Learned Special Counsel submits that as observed in the SHOW CAUSE NOTICE, as evidenced by 37(B) of the financial statement, Huawei Tech had provided corporate guarantee to the bankers of the 20 ST/61636/2018 & 02 others appellant for working capital demand loans; appellant expressed inability to submit Board Resolution, credit sanction advice letters of the bank and other details; a corporate guarantee is usually given by a company to another group/related party, which is used as a security by the Bank or Financial Institution extending loans to the said related party; corporate guarantee is used as a substitute to Bank Guarantee; it helped in reduction of the cost of funding in the form of lower rate of interest to the appellant; it benefitted the appellant in two ways, one in form of lower rate of interest on loans and secondly in the form of zero cost for corporate guarantee to be provided to the lender/ bank; taxable value in the matter has to be determined under section 67(1)(ii) of the Act read with Service Tax (Determination of Value) Rules 2006 (Valuation Rules in short); SHOW CAUSE NOTICE has applied a notional rate of 2% as prescribed for International transactions between Associated Enterprises as per Rule 10TC(V)(a) of Safe Harbour Rules in Income Tax Law, for the purpose of determining the taxable value; the plea of the appellant that corporate guarantee is not akin to bank guarantee has been rejected by the impugned OIO; case of Glenmark Pharmaceuticals Ltd of ITAT relied upon by the appellant has also been found not relevant to the case.
15.2. Learned Special Counsel submits that relying on Sterlite Industries Ltd 2014 (35) STR 849 (T-Chennai) and ED Chennai vs ICOMM Tele Ltd 2017 (347) ELT 717 (ATFE), the adjudicating authority observed that Banking & Financial services as per section 21 ST/61636/2018 & 02 others 65(12) of the Act encompasses a wide range of services including providing bank guarantee, overdraft facility etc; plea regarding absence of consideration in the matter has been dealt by the impugned order, rightly observing that in such type of situation, where there is no actual consideration but supply of services done with attendant benefits to the recipient, the provisions of section 67(1)(iii) come into play and the value of consideration or taxable value needs to be determined in the manner prescribed in the law i.e. Rule 3(b) of Valuation Rules; the case of Bhayana Builder decided by SC has also been rightly distinguished; the adjudicating authority also found 2% of the guarantee amount to be reasonable and justified for determining the taxable value in the matter by taking recourse to Safe Harbour Rules of Income Tax; he has considered the case of Everest Kento Cylinders Ltd vs DCIT relied upon by the appellant and held that ADJUDICATING AUTHORITY has rejected the plea that the appellant had received a quote of 0.1% bank guarantee commission from its commercial banker, by noting that it was applicable only up to Rs. 20 Crores credit only, whereas, the appellant had received around Rs. 500 to 1500 crores per annum from its overseas associated enterprises; Rule 3(a) of Valuation Rules as claimed by the appellant is not applicable in the case because there is no such service being provided by the service provider Huawei Tech to any other person in the ordinary course of business; The adjudicating authority rightly rejected the argument, on this admitted account itself, and correctly applied the Rule 3(b) of Valuation Rules; rate of 22 ST/61636/2018 & 02 others 2% taken by the Adjudicating Authority is in order as per Safe Harbour Rules.
15.3. Learned Special Counsel submits that the appellant has also taken the stand that there is no such contract value prescribed by way of the agreement between the Appellant and Noticee; in the absence of any contract value, no service tax can be charged; they rely on Indus Motors Ltd 2008 (9) STR 18 (Tri. Bang), Jabalpur Motors Ltd 2014 (36) STR 1160 (Tri. Delhi), Circular No. 62/11/2003 dated 21.08.2003 and Circular No. 354/59/2006-TRU dated 10.11.2006. Learned Special Counsel submits, in reply, that this plea of the appellant has been dealt with in detail in para 27.7 to 27.11 of the impugned order, conceding that no consideration was actually paid by the appellant to Huawei Tech; however, the provisions of section 67(1)(iii) of the Act clearly become operational in such kind of situation, where the activity involves benefit to the appellant as in absence of such corporate guarantee they would have incurred certain cost for seeking loans from the banks as per prevalent practice; Rule 3(b) of Valuation Rules, 2006 provides the manner of determination of value stating in cases where the value cannot be determined as equivalent money value of such consideration; notional value was taken as per Safe Harbour Rules for the corporate guarantee given in international transaction; hence, the same cannot be found to be unreasonable at all; the case laws relied upon by the appellant are not applicable to facts of this case.
23 ST/61636/2018 & 02 others 15.4. Learned Special Counsel submits as regards the appellants submissions in Appeal No. ST/16160/2020 filed against the impugned order dated 03.01.2020 that apart from the aforesaid grounds, the appellant has relied upon the case of L&T Ltd 2016(44)STR 391 (Guj), Bhayana Builders 2018 (10) GSTL 118 (SC), DLF Cybercity Developers Ltd 2019 (28) GSTL 478 (T-Mum) - 2020 (33) GSTL J129 (SC), Edelweiss Financial services Ltd [2023] 5 Centax 57 (T-Mum) - 2023 (73) GSTL 4 (SC) to support their point of contention that where no consideration has been received for providing corporate guarantee, no service tax is payable for want of consideration. He submits that the case of DLF Cybercity relied upon by the appellant has been challenged before Hon'ble Supreme Court, which stands admitted as reported at 2020 (33) GSTL J129(SC); hence, the decision of Tribunal is not final and therefore not persuasive; case of Edelweiss Financial services Ltd (supra)is not comparable facts; appeals may be kept pending till final outcome of the revenue appeals in the case of DLF Cybercity Developers Ltd before Hon'ble Supreme Court.
On Limitation, Interest and Penalty
16. Learned Special Counsel submits, on the issue of limitation, that the impugned order dealt with extended period and equal penalty; it is not disputed that the short payment, non-payment or irregular availment of credit had come to the knowledge of the department only as a result of audit and further investigation in the matter; but for the audit / investigation, the evasion of service tax would have 24 ST/61636/2018 & 02 others remained suppressed by the appellant; hence the proviso to section 73(1) is applicable to the case and five years period from the relevant date is available; hence, the Show Cause Notice dated 22.01.2016 is also not barred by limitation of time; consequently, equal penalty under Section 78 is also attracted as per settled law.
17. Learned Special Counsel submits that appellants relied on the cases of HMM Limited, 1995 (76) ELT 497 (SG), H. Guru Investment (North India) Pvt. Ltd. 1998 (104) ELT 8 (All) and Coolade Beverages Ltd. Vs CCE, Meerut, 2004 (172) ELT 451 (All.); since, the demand of service tax is held valid in the impugned orders, the demand of interest being civil liability by virtue of law becomes automatically attracted and recoverable as per settled law; consequent to confirmation of demand for extended period of demand, equal penalty becomes imposable under section 76/ 78 of the Act. He relies on the following cases.
Pratibha Processors Vs UOI 1996 (88) ELT 12 (SC) UOI vs Valecha Engg Ltd 2010 (249) ELT 167 (Bom) Dharmendra Textile Processors 2008(231) ELT 3 (SC) Rajasthan Spinning & Weaving Mills 2009 (238) ELT 3 (SC) Lark Chemicals Pvt Ltd 2016 (42) S.T.R. 417 (S.C.)
18. Learned Special Counsel submits, on the issue of demand of penalty and interest after reversal of CENVAT Credit, which was only availed but not utilised, before issuance of Notice, and Payment of Service Tax, for, that the provisions of Section 73(3) of the Act are applicable only subject to ingredients provided in Section 73(4) of the 25 ST/61636/2018 & 02 others Act; since the case has been held to involve suppression of facts with intent to evade payment of service tax, the plea is liable to be rejected in terms of provisions of section 73(4) of the Act. Learned Special Counsel submits, on the issue of applicability of interest when credit availed is reversed without utilization, and appellant's reliance on the case of M/s. Strategic Engineering (P) Ltd. 2014-TIOL466-HC- MAD-CX, learned Counsel submits that the point may be considered if the appellant had not utilised the credit during the period under examination. Learned Counsel submits on the reversal of Cenvat credit of Rs 82,82,930, which was erroneously availed and utilized by the Appellant, that due to suppression of facts with intent to evade payment of duty, the appellant has rendered themselves liable to pay penalty under Section 78 of the Finance Act,1994, as brought out in the impugned order.
19. Learned Special Counsel submits, on the plea of the appellants that they promptly made payment along with applicable interest on such services received from outside India, before issue of Show Cause Notice and hence, no penalty can be imposed as held in Bhoruka Aluminum Ltd. Vs CCE & ST, Mysore 2017 (51) STR 418 (Tri. Bangalore), that when demand is sustained under extended period, the penalty under section 78 becomes automatically payable. On the plea of the appellants that where the details of transactions are recorded for the period 08.04.2011 to 14.05.2015, the penalty shall by 50%, learned special Counsel submits that no such plea was raised before the Adjudicating Authority; appellant had only raised 26 ST/61636/2018 & 02 others plea regarding penalty @15% of the amount of tax under section 78 of the Act in cases of payment of tax along with interest before issue of SHOW CAUSE NOTICE.; the plea was addressed and rejected; in view of clear and unambiguous provisions contained in proviso to section 78 that the reduced penalty @15% is available only when the said reduced amount of penalty is also paid before issue of Show Cause Notice, which was not done in the impugned case.
20. Learned Special Counsel submits on the issue of penalty under section 77 that the show cause notice dated 22.01.2016 specifically indicated that why penalty should not be imposed under Section 77 for contravention of section 70 of the Act read with rule 7 of STR, 1994for not filing periodical ST-3 returns in proper manner. On the plea that penalty cannot be imposed under Section 76 and 77 if the assessee proves that there was reasonable cause for failure to pay service tax and as there is a bona fide belief that no service tax is payable on receipt of corporate guarantee, learned Special counsel submits that no such plea was raised before the Adjudicating Authority; regarding the contention for benefit under Section 80 for waiver of penalty under Section 80, the appellant has not been able to justify the reasonable ground and bona fide belief as required in the said section; the appellant has not paid the tax amount along with interest even after being pointed out by the department; hence, the plea of bona fide belief cannot sustained and claim is liable to be rejected.
27 ST/61636/2018 & 02 others
21. Heard both sides and perused the records of the case. Brief issues that require consideration in the appeals are as to
(i) whether the Learned Commissioner was correct in dropping the demand of Rs 3,66,07,637, on services received from M/s HTCL, China, during 2011-12, holding that the services provided by Huawei, China in Nepal fall under 'Erection, Commissioning or Installation service' and not under 'Management or Business Consultancy Services' as alleged in the Show Cause Notice.
(ii). whether the Learned Commissioner was correct in dropping the demand of Rs 6,75,40,376, on the basis of reconciliation submitted by the appellant during adjudication, out of the demand issued on the basis of discrepancy of accounts??
(iii). Whether the appellants are eligible to rebate of Rs 11,92,94,464, along with interest and equal penalty, considering the Market Research Agency Services, claimed as Export of Service, during 2010-11to 2011-12?? and as to whether it was open for the Revenue to Recover, the rebate already sanctioned, invoking proviso to section 73(1) along with interest and equal penalty under section 78 of the Act, holding the same to be 'Erroneous Refund' without reviewing/appealing against the rebate sanctioning order??
(iv). Whether the appellants were required to pay service tax of Rs 14,66,09,376, along with interest and penalty of 2,92,64,000 on the reverse charge mechanism, on the Banking and other Financial Services, for the Corporate Guarantee given by the Overseas Associate Enterprises to Banks, during the period 2010-11 to 2014- 15, on behalf of appellant??
28 ST/61636/2018 & 02 others
(v) Whether the appellants were required to pay service tax of Rs. 35,41,833, along with interest and equal penalty, out of total demand of Rs. 52,10,01,846, raised on account of short payment of Service Tax under Erection Commissioning and Installation Service, during 2011-12.
(vi). Whether the appellants are liable to pay interest and equal penalty, on the demand of Cenvat Credit, of Rs 1,56,959, availed on Rent a Cab service and Event Management Services, during 2011-12, paid by the appellants and appropriated by the impugned order??
(vii). Whether the appellants are liable to pay interest and penalty of Rs. 10,000/- under section 77 on various demands confirmed (Rs. 82,82,930 on double availment of Cenvat credit during 2010-11 +7 Rs 75,664 Short payment of service tax under RCM on import of services, during 2011-12 + Rs 3,60,500 on non-payment of service tax under RCM on expenses for Sponsorship services, during 2011-12 + Rs 5,59,344 on short payment of service tax under Erection and Commissioning and Installation Service, during 2010-11 to 2011-12)
22. Coming to the question, No.(i) in Para 19 above, as to whether the Learned Commissioner was correct in dropping the demand of Rs 3,66,07,637, on services received from M/s HTCL, China, during 2011-12, holding that the services provided by Huawei, China in Nepal fall under 'Erection, Commissioning or Installation service' and not under 'Management or Business Consultancy Services' as alleged in the Show Cause Notice, we find that learned Commissioner finds that to decide the classification of the services, the activities 29 ST/61636/2018 & 02 others undertaken by the sub-contractor need to be looked as a whole and not in piecemeal; the sub-contractor was awarded the contract of installation of 2G/3G network rollout; the role of the appointed sub- contractor was to perform the actual management/ installation function and not to render any kind of advice or consultancy only. Learned Commissioner further holds that the definition of Management Consultancy Services covers Advisory Service only and not the actual performance of the function. We find that learned Commissioner has considered a certificate, produced by the appellants, from M/s Huawei Technologies Co. Ltd., stating that activities undertaken by them as per the Agreement dated 09.12.2010 and that in order to undertake the principal activity of installation of equipment, the following activities were undertaken by Huawei, China:
Physical handling of material to be installed, unpacking of materials.
Verification of materials on the basis of agreed packing list. Installation of Basement Unit of BTS & DDCU. Installation of RRU.
Connecting telecom equipment and cables. After installation, testing of installed hardware. 22.1. Learned Special Counsel for the Revenue submits that Network Roll-out Service is a composite service as it comprises of delivery and installation of mobile network system; it includes project 30 ST/61636/2018 & 02 others management, roll-out design, OSP, site construction, TE implementation, network design services etc. and is chargeable to duty as a composite service in terms of Section 65A(2)(b) of the Finance Act, 1994. However, we find that the show cause notice does not allege that the service received by the appellants from M/s HTCL, China in respect of 2G/ 3G roll-out in Nepal were composite services.
The show cause notice seeks to confirm the demand stating that the service received by the appellants falls under Management, Consultancy Service. Therefore, we find that the learned Special Counsel is not free to take the plea at this juncture. We find that learned Commissioner after considering the submissions of the appellant and the show cause notice that the services rendered fall under erection, commissioning and installation services and as the show cause notice did not classify the services under erection, commission etc., the demand is not sustainable. 22.2. On going through various cases cited by the appellants, we find that there is a significant difference between management and actual function. We understand that management/ consultancy involves only giving advice but not the actual performance thereof. we find that Allahabad Bench of the Tribunal in the case of Basti Sugar Mills Pvt. Ltd. (supra) held that:
8. An ocean separates a manager from a management consultant, a performer from an advisor or a coach. That ocean exists in the present case also. We dealt with a similar case in Rolls Royce Industries Power (I) Ltd.
(Supra) and held that where the agreement conferred operational autonomy and 31 ST/61636/2018 & 02 others responsibility on the contracted party, the relationship is not one of consultancy. The ratio of that decision covers the present dispute also. There is no management consultancy in the facts of the present case and the demand is clearly beyond the scope of the statute.
22.3. We find that the above decision of the Tribunal was upheld by the Hon'ble Supreme Court (supra). In the impugned case also, we find that under the sub-contracting agreement dated 09.10.2010, the works specified was roll-out of 2G/ 3G network in Nepal and was not restricted to mere consultancy or advice. Revenue argues that as per Note 37(B) to the financial statements of the balance sheets, the appellants have incurred the expenses under the Head "Project Management Service" and the invoices also described the work to be network roll-out. We are of the considered opinion that the nature of the work cannot be inferred from the terminology used in the books of accounts but it has to be taken from the terms of the agreement and the actual service performed. Roll-out of 2G/ 3G understandably involves laying of cables, towers etc. and as such, involves actual installation and not Consultancy or Management Service. Therefore, we find that there is no infirmity in the findings of the learned Commissioner, who has based his observations on the terms of the contract. To this extent, we find that Revenue has not made out any case for confirmation of duty under Management, Consultancy Services and the appeal No. ST/61696/2018 filed by Revenue, as far as it relates to the dropping of demand of Rs.3,66,07,677/- is concerned, liable to be rejected.
32 ST/61636/2018 & 02 others
23. Coming to the question, as at No.(ii) in Para 19 above as to whether the Learned Commissioner was correct in dropping the demand of Rs 6,75,40,376, on the basis of reconciliation submitted by the appellant during adjudication, out of the demand issued on the basis of discrepancy of accounts, we find that the noticee submitted that the Department has followed an inconsistent approach in respect of the reconciliation inasmuch as some amounts were computed excluding the service tax and in respect of certain amounts reflected as advances and debtors have been considered inclusive of service tax while ignoring certain factual figures. We find that learned Commissioner correctly observed that, during 2010-11, in terms of Rule 6 of Service Tax Rules, 1994, service tax requires to be paid only after the receipt of the payment by the service provider; however, in case of services provided to associated enterprises, service tax was payable on the accrual of service in the books of accounts or the receipt of consideration whichever is earlier; Commissioner has correctly found that the show cause notice is not correct as far as inclusion of unbuild revenue is concerned. Learned Commissioner finds correctly that the show cause itself states that the demand has been worked out on gross amount/ billed towards revenue. He finds correctly that "gross amount charged" should be equal to "the value of taxable services" plus "service tax payable". We find that in principle, the finding given by the learned Commissioner is acceptable. However, we find that the Department has taken the ground, in the appeal (ST/61696/2018) filed by them, 33 ST/61636/2018 & 02 others that the adjudicating authority erred in considering the submissions of the noticee and ignored the fact that there is a difference between the figure considered by him and the figure reflected in ST-3 Returns; it is submitted that while the amount mentioned in taxable value as per ST-3 was mentioned in the show cause notice as Rs.1106,73,31,116 whereas the adjudicating authority took the same as Rs.1221,03,28,611 giving rise to a difference of Rs.114,29,97,495. We find that the Revenue has a point in this regard as far as actual figures are concerned. While holding that the principle adopted by the learned Commissioner is correct as discussed above, we are of the considered opinion that the issue must travel back to the adjudicating authority to reconcile the difference on the basis of the correct figures available in the records.
24. Next question, as at (iii) in Para 19 above, that requires to be addressed is as to whether the appellants are eligible to rebate of Rs 11,92,94,464, along with interest and equal penalty, considering the Market Research Agency Services, claimed as Export of Service, during 2010-11to 2011-12?? and as to whether it was open for the Revenue to Recover, the rebate already sanctioned, invoking proviso to section 73(1) along with interest and equal penalty under section 78 of the Act, holding the same to be 'Erroneous Refund' without reviewing/appealing against the rebate sanctioning order. We find that the appellants classified services under MRAS till March, 2010 and thereafter changed the classification to BAS; Adjudicating Authority confirmed the demand, for the period, December 2010- 34 ST/61636/2018 & 02 others March, 2011, on the grounds that the subject services appear to be MRAS, as the Assessee is supposed to explore the market for overseas entity and such activities fall under MRAS. The appellant pleads that the services provided by the Appellant to Huawei Technologies Co. Ltd (Huawei China) and Huawei International Pte Ltd (Huawei Singapore) qualify as BAS in terms of Section 65(19) of the Act.
24.1. On going through the definition of the Services Agreement between Huawei China/Singapore as the services provided by the Appellant, we find that the services are in relation to promotion and marketing of goods, customer services, development of prospective customers; appellant is responsible for acting as a link between potential/existing customers located in India and Huawei China/Singapore; the Appellant gathers market information relating to the products of Huawei China/Singapore and also provide services which ensure that services of a high quality are provided; such services are in relation to promotion of goods belonging to Huawei China/Singapore, evaluation and development of prospective customers and customer care services. Therefore, we find that the services fall under Business Auxiliary Services in terms of Section 65(19) of the Act. It was held in M/s. Microsoft Corporation India Pvt Ltd (supra) that dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry, investigating feasibility of new markets for Microsoft retail products and providing other services of marketing 35 ST/61636/2018 & 02 others nature, etc. local advertising; performing other activities including dissemination of information to potential customers, commenting on any developments in the territory affecting the software industry qualify as BAS. We also find that the Tribunal held similarly in Kesar Products Ltd and J.J. Foam Pvt Ltd and (both supra). 24.2. Further, we find that Tribunal in the cases of M/s. Medallion Consulting Pvt Ltd; B.A. Research India Ltd; Misys Software Solutions India Pvt Ltd; M/s. Medallion Consulting Pvt Ltd and Glaxo SmithKline Asia (all supra), held that even services under Market Research and Analysis Services, where benefit of the research is used by a customer situated outside India in its business, the same will be treated to have been performed outside India and thus, amounting to export. Thus, we find that either way the appellants claim for Refund/rebate can not be denied.
24.3. We further find that the Learned Counsel for the appellants submits that the rebate has been sanctioned to them on the above account. The impugned order seeks to recover the rebate without filing any appeal against the rebate/refund sanctioning order. We find that refund was sanctioned by Order dated 26.12.2013 and no appeal was filed against such order. We find that Hon'ble High Court of Allahabad in case of Honda Siel Power Product 2020 (372) E.L.T. 30 (All.) held that
28. Thus, from the reading of provisions of Section 11A(1) of the Act, which provides for recovery of any duty of excise which has not been levied or paid or has been short 36 ST/61636/2018 & 02 others levied or short paid or erroneously refunded. The recovery of such amount of excise duty can be made under Section 11A(1) irrespective of whether such non 11 levy or nonpayment or short levy or short payment or erroneously refund was on the basis of any approval, acceptance or assessment relating to rate of duty or on valuation of excisable goods under any other provisions of this Act, or Rules made thereunder.
29. Section 35 of the Act, provides for appeals to Commissioner (Appeals), wherein any person aggrieved by any decision or order passed under this Act, may appeal within 60 days from the date of communication. Further, Section 35E which confers power on Committee of Chief Commissioner of Central Excise to either call for and examine the records of any proceedings in which a Principal Chief Commissioner of Central Excise or Commissioner of Central Excise as an Adjudicating authority has passed a decision or order under the Act, and may direct such Commissioner or any other Commissioner to apply before Appellate Tribunal for decision. While Section 11B of the Act, provides for claim for refund of excise duty.
30. As in the present case, provisional assessment was finalised on 24-7-2015, the assessing authority recorded a finding that CA certificate dated 15-6-2015 certifies that no part of duty is recovered from the dealers/distributors involved in the discount passed on to the dealers/distributors, which indicates that assessee had not passed on the incidence of duty paid in proportion to the discount given to dealers/distributors and, therefore, issue of unjust enrichment is a remote possibility and further, the order observed that duty to the tune of Rs.
17,89,42,303/- was passed on to the customers and duty deposited to the tune of Rs. 1,03,75,633/- was in excess.
37 ST/61636/2018 & 02 others Further, an application being made by petitioner was adjudicated by Assistant Commissioner on 5-11 2015 wherein it was held that it was not a case of unjust enrichment and petitioner was entitled for refund. This order was also not challenged by revenue and the same attained finality.
31. Thus, question for consideration before us is, as to whether the revenue can initiate proceedings under Section 11A for recovery of excise duty, once adjudication had been made by department making final provisional assessment and, thereafter, adjudicating application for refund under Section 11B, and no appeal being filed challenging the said adjudication which having attained finality, is barred on the ground of change of opinion or would amount to reassessment when once the revenue did not take recourse to appeal in higher forum.
32. As it is not in dispute that after provisional assessment order, the adjudicating authority passed an order for refund under Section 11B of the Act. Both the orders which were appealable and revisable under Section 35 and 35E were never taken to the higher forum by revenue and they attained finality. It was only after decision of the Apex Court in case of Addison and Company (supra) that show cause notice was issued on 17-8 2017, and order was passed on 30-11-2017 directing the petitioner for refund of excise duty to be deposited in Consumer Welfare Fund.
33. A careful reading of Sections 11A, 11B, 35 and 35E would reveal that an application for refund as envisaged under Section 11B is not to be dealt as a ministerial Act, or an administrative Act, rather an application has to be made by person claiming refund within a prescribed time and the application is to be accompanied by documents referred to in Sub-section (1) of Section 11B to establish 38 ST/61636/2018 & 02 others that amount of duty of excise and interest, if any paid on such duty in relation to which such refund is claimed was collected from, or paid by him and the incidence of such duty and interest, if any, paid on such duty has not been passed on by him to any other person. It is on the receipt of this application, Assistant Commissioner or Deputy Commissioner of Central Excise, if satisfied may make an order for refund. Thus, it is only after the adjudication of the application that an order of refund of duty and interest is passed.
34. Sub-section (3) of Section 11B which is a non- obstante clause makes it clear that dehors any judgment, decree, order or direction of appellate Tribunal or Court or any other provision of the Act, no refund shall be made except as provided in Sub-section (2). Thus, the procedure prescribed under Section 11B not only regulates the manner and form in which an application for refund is to be made but also prescribes period of limitation as well as method of adjudication in which refund has to be made.
35. Thus, Section 11B assumes great significance, as any order of refund of excise duty and interest is made only after the adjudication as envisaged under scheme of Section 11B. In the present case, petitioner company had made an application for refund which was adjudicated on 5-11-2015 and it was directed to refund excise duty to tune of Rs. 1,02,75,633/- which was in excess. This order was never challenged by revenue in appeal and it attained finality.
36. Thus, once the order of adjudication has been validly passed under Section 11B and a refund has been made on 5-11-2015, the next question which crops up for consideration is as to whether Section 11A can be invoked thereafter.
39 ST/61636/2018 & 02 others
37. As Section 11A(1)(a) uses the word "Central Excise Officer" who is empowered for recovery of any refund, Central Excise Officer is defined in Section 2(b) of the Act, to mean Chief Commissioner of Central Excise, Commissioner of Central Excise, Commissioner of Central Excise (Appeals), Additional Commissioner of Central Excise, Joint Commissioner of Central Excise, Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise or any other officer of Central Excise Department invested by Central Board of Excise and Customs constituted under Central Board of Revenue Act, 1963 with any of powers of a Central Excise Officer under the Act. Thus, an order of recovery can be passed under Section 11A by an Assistant Commissioner, as he happens to be a Central Excise Officer in terms of Clause (a) of sub-section (1) of Section 11A, though an application under sub-section (2) of Section 11B can be made and an order for refund can either be passed by Assistant Commissioner or by Deputy Commissioner. Meaning thereby that a Deputy Commissioner can pass an order for refund under Section 11B(2) and an Assistant Commissioner can invoke proceedings for recovery under Section 11A(1) 12
38. This could lead to a situation where power of recovery under Section 11A is invoked by a subordinate authority despite the fact that refund application has been adjudicated upon by a superior authority under Section 11B.
39. Through plain reading of Section 35E, it is clear that limited revisional jurisdiction is conferred upon Principal Commissioner and Commissioner of Excise in sub-section (2) of Section 35E, this power is not actually to correct any error directly, but only available for directing the competent authority to take matter to the Commissioner 40 ST/61636/2018 & 02 others (Appeals). Meaning thereby that it is always open to Principal Commissioner or Commissioner or Central Excise to examine the order passed by adjudicating authority under Section 11B and direct the competent authority to file appeal against order of refund. In the present case, order of refund was never taken to higher forum and it became final.
40. Decisions relied upon by the counsel for the revenue in case of Jain Shudh Vanaspati (supra) relates to proceedings which were vitiated by fraud. Further, the Apex Court recorded a clear finding that goods were cleared for home consumption under Section 47 of the Act, by playing fraud upon the Department. Therefore, the Court held that fraud vitiates all solemn Acts, while in present case department has not alleged any fraud upon the petitioner-assessee.
41. Further reliance placed by counsel for revenue on the decision of Addison and Company (supra), wherein it was held that recovery under Section 11A can be made where excise duty was refunded erroneously, but the Apex Court had also held that where the incidence of duty was not passed on and the assessee had borne burden of duty, thus he was entitled for the refund. Thus, both the cases relied upon by the department are not applicable in the present case, as it is neither a case of fraud, nor where incidence of duty was passed on. 42. Secondly, the argument of alternative remedy under Section 35 is concerned, the said fact is of no rescue to the department as specific case of petitioner is that show cause notice dated 17-8-2017 was issued after more than two years from finalisation of assessment order dated 24-7-2015, and where there is change of opinion by issuance of show cause notice, writ petition is maintainable as held in 41 ST/61636/2018 & 02 others Shahnaaz Ayurvedics (supra), Simplex Concrete Piles (supra) and Samsung India Electronics Pvt Ltd. (supra).
43. As seen above that Section 35E and 11A operate in different fields and are invoked for different purposes, we are merely concerned in this case with the interplay between Sections 11A and 35E. We are also concerned with what happened in the form of an adjudication under Section 11B. What happens in a case wherein adjudication takes place under Section 11B and authorities do not take recourse available to them, whether after having allowed adjudication under Section 11B to attain finality, was there any remedy available to department at all under Section 11A to proceed.
44. This question was considered and decided in Eveready Industries (supra), wherein the Court held that two valuable rights, one in the form of right of appeal and another in form of order of refund, are now sought to be taken away indirectly by taking recourse to Section 11A. What cannot be done directly cannot be done indirectly also.
45. Thus, the department, once the adjudication has taken place under Section 11B cannot proceed to recover on the basis of "erroneous refund" under Section 11A so as to enable the refund order to be revoked, as the remedy lied under Section 35E for applying to the Appellate Tribunal for determination and not invoking Section 11A 24.4. We find that the same principle was upheld in the cases of Eveready Industries India Ltd; BT (India) Pvt Ltd and Flock (l) Pvt Ltd
- 2000 (120) ELT 285 (SC). Therefore, we are of the considered opinion that it is not open to the department to initiate proceedings to 42 ST/61636/2018 & 02 others recover the refund sanctioned, unless a competent authority, duly empowered by law, holds that such refund was erroneous. Thus, the appellants succeed on all the three counts.
25. Coming to the issue, at question No (iv) as at Para 19 above, as to whether the appellants were required to pay service tax of Rs 10,69,70,856 plus Rs 3,96,38,520, along with interest and penalty on the reverse charge mechanism, on the Banking and other Financial Services, for the Corporate Guarantee given by the Overseas Associate Enterprises to Banks, during the period 2010-11 to 2014- 15, on behalf of appellant, we find the adjudicating authority finds that the term banking and other financial services in Section 65(12) encompasses various services including bank guarantee; Function of bank guarantee is akin to corporate guarantee; the activity/transaction involves benefits to Huawei and in the absence of this activity/transaction; it would have incurred certain costs. He submits that the Adjudicating authority incorrectly relies on the Safe Harbour Rules for determining the value of consideration as 2% of the guaranteed amount.
25.1. Learned Counsel for the appellants submits that the issue is no longer res integra; there is neither a service nor any consideration involved in cases where corporate guarantee is provided by the associated enterprises to the banks for working capital related loans required by the Assessee; Hon'ble Tribunal in a series of judgments held that no Service Tax under the category of banking and other 43 ST/61636/2018 & 02 others financial services can be demanded on Corporate Guarantee provided by Associated Enterprise. We find that Tribunal in the case of DLF Home Developers Ltd 2023 SCC Online CESTAT 962 held that:
6. Coming to the second issue, we find that the Department has not adduced any evidence to the effect that the appellants have received any consideration in providing bank guarantees. This Bench in the case of appellants group company have decided the issue vide Final Order No.60890/2019 dated 21.10.2019 in their favour. The Bench observed that:
4. It is an admitted fact that the appellant has not received any consideration from either from the financial institutions or from their associates for providing corporate guarantee, in that circumstances, no service tax is payable by the appellant. Moreover, the demand raised in the show cause notices are on the basis of assumption and presumption presuming that their associates have received the loan facilities from the financial institution at lower rate, therefore, the differential amount of interest is consideration, but there is no such evidence produced by the revenue on that behalf. In that circumstances, we hold that the appellant is not liable to pay any service tax on corporate guarantee provided by the appellant to various banks/financial institutions on behalf of their holding company/associate enterprises for their loan or over draft facility under Banking and Financial Institutions after or before 01.07.2012. 5. In view of this, we set-aside the impugned order qua demand of service tax on corporate guarantee provided by the
44 ST/61636/2018 & 02 others appellant. We further take note of the fact that for the charges leviable on account of prime location charges etc., the appellant has already paid service tax along with interest before issuance of the show cause notice. Therefore, we hold that in terms of Section 73(3) of the act, the proceedings were not required to be initiated against the appellant, therefore, penalty imposed on the appellant is set 4 ST/61204/2018 aside. Accordingly, the impugned order is set aside, the appeal is allowed with consequential relief.
7. The Co-ordinate Bench, Mumbai in the case of Commissioner of CGST Vs Edelweiss Financial Services Ltd. (Final Order No. A/85986/2022 dated 16.02.2022) held that:
8. The criticality of „consideration‟ for determination of service, as defined in section 65B(44) of Finance Act, 1994, for the disputed period after introduction of „negative list‟ regime of taxation has been rightly construed by the adjudicating authority. Any activity must, for the purpose of taxability under Finance Act, 1994, not only, in relation 7 ST/87134/2018 to another, reveal a „provider‟, but also the flow of „consideration‟ for rendering of the service. In the absence of any of these two elements, taxability under section 66B of Finance Act, 1994 will not arise. It is clear that there is no consideration insofar as „corporate guarantee‟ issued by respondent on behalf of their subsidiary companies is concerned.
45 ST/61636/2018 & 02 others 25.2. We find that the ratio of the above case was followed in Jindal Stainless Steel; Sterlite Industries India Ltd. and Sowar Pvt Ltd (all supra) holding that Extending Corporate Guarantee is not a taxable service. We also find that there is no provision under the Finance Act, 1944 to impose any notional value on services. In view of the same, we find that the issue is decided in favour of the appellants.
26. Coming to the question raised at (v) at Para 19 above as to whether the appellants were required to pay service tax of Rs. 35,41,833, along with interest and equal penalty, out of total demand of Rs. 52,10,01,846, raised on account of short payment of Service Tax under Erection Commissioning and Installation Service, during 2011-12, we find that the appellants submit that service tax liability to the extent of Rs.21,56,45,734/- was paid twice and was later rectified by Entry in the financial year 2011-12; the fact is also certified by the Chartered Accountant. Further, the appellants submit that demand of Rs.35,41,833/- out of the demand of Rs.52,10,01,846/- is not justified. The Revenue contends that assessee did not submit any proof. The appellants submit that service tax was discharged on receipt basis as against the demand raised on accrual basis in different financial years; the appellants have accepted the demand and paid the amount along with interest and penalty totaling to Rs.67,48,987/-. We find that learned Commissioner has confirmed demand of Rs.35,41,833/- on account of reconciliation of financial statements vis-à-vis ST-3 Returns along with interest and equal penalty. The appellants claim that they have 46 ST/61636/2018 & 02 others paid the demand along with interest and penalty. However, the same needs to be verified by the lower authorities.
25. On the issue, as at Para 19 (vi) above, as to whether the appellants are liable to pay interest and equal penalty, on the demand of Cenvat Credit, of Rs 1,56,959, availed on Rent a Cab service and Event Management Services, during 2011-12, paid by the appellants and appropriated by the impugned order, we find that the appellants have deposited the entire demand before issuance of show cause notice. The appellants claim that as the credit was not utilized, there will be no question of payment of interest and penalty as held in Strategic Engineering Pvt Ltd (supra). We find that there is force in the argument of the appellants. Therefore, we are inclined to allow the appeal as far as this issue is concerned.
27. On the issue, as at Para 19 (vii) above, as to whether the appellants are liable to pay interest and penalty of Rs. 10,000/- under section 77 on various demands confirmed (Rs. 82,82,930 on double availment of Cenvat credit during 2010-11 +7 Rs 75,664 Short payment of service tax under RCM on import of services, during 2011-12 + Rs 3,60,500 on non-payment of service tax under RCM on expenses for Sponsorship services, during 2011-12 + Rs 5,59,344 on short payment of service tax under Erection and Commissioning and Installation Service, during 2010-11 to 2011-12), however the appellants submit that they have paid duty along with interest; even then penalty was imposed. Under the facts and circumstances of the case, where mens rea was not established, looking into the fact that 47 ST/61636/2018 & 02 others the appellants had sufficient balance and have paid the service tax before issuance of show cause notice, we find that no penalty can be imposed. We find that the Tribunal held in the case of Bio -Med Healthcare Products Pvt Ltd (supra) that no show cause notice is required to be issued when service tax stands paid by the appellant.
28. In view of the above discussions and findings, the appeal Nos.ST/61636/2018; ST/60160/2020 filed by the appellants M/s Huwaei Telecommunications Co. India Pvt Ltd and appeal No. ST/61696/2018 filed by the Department are partly allowed in the following terms:
(i) Impugned order dropping the demand of Rs.3,66,07,637/-, on account of Management Business Consultants Service, is upheld.
(ii) Demand of alleged wrongly availed CENVAT credit of Rs.11,92,94,464/- and availment of rebate of the same, is set aside; interest and penalty are also accordingly set aside.
(iii) Demand of Rs.10,69,70,856/- raised on Corporate Guarantee is set aside; interest and penalty are also accordingly set aside.
(iv) Dropping of service tax liability of Rs.6,75,40,376/- is set aside and remanded back to the authority to reconcile with the financial records and ST-3 Returns and any other evidence that may be submitted by the appellants.
(v) Regarding the demand of service tax of Rs 35,41,833 along with interest and penalty, the issue is remanded to the 48 ST/61636/2018 & 02 others adjudicating authority to confirm the payment of service tax along with interest and penalty by the appellants.
(vi) As regards the demands of Rs 1,56,959 on Rent-a-Cab Service and demand of Rs 92,78,438 (Rs 8282930 + Rs 75664 + Rs 360500 + Rs 559344) as the appellant has discharged the liability along with interest, penalties imposed are set aside.
(vii) Penalty of Rs.10,000/- imposed under Section 77 of Finance Act, 1994 is also set aside.
(Order pronounced in the open court on 29/04/2025) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) PK