Custom, Excise & Service Tax Tribunal
Linde Engineering India Private ... vs Vadodara-I on 6 November, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST ZONAL BENCH : AHMEDABAD
REGIONAL BENCH - COURT NO. 3
SERVICE TAX Appeal No. 10661 of 2021-DB
[Arising out of Order-in-Original/Appeal No VAD-EXCUS-001-COM-22-20-21 dated
29.01.2021 passed by Commissioner of Central Excise, Customs and Service Tax-
VADODARA-I]
LINDE ENGINEERING INDIA PRIVATE LIMITED .... Appellant
Linde House, Near Nilambar Circle, Vasna Gotri Road
Vadodara, Gujarat - 391410
VERSUS
Commissioner of Central Excise & ST, Vadodara .... Respondent
1st Floor, Central Excise Building,
Race Course Circle, Vadodara,
Gujarat - 390007
APPEARANCE :
Shri Venkateshwaran and Ms. Nikita Jain, Chartered Accountants for the
Appellant
Shri Tara Prakash, Deputy Commissioner (AR) for the Respondent
CORAM: HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)
HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL)
DATE OF HEARING : 05.07.2023
DATE OF DECISION: 06.11.2023
FINAL ORDER NO. 12549/2023
C L MAHAR :
The brief facts of the matter are that M/s. Linde Engineering India
Private Limited ('the Appellant') is registered with the jurisdictional
service tax department, having a centralized service tax registration.
The Appellant is engaged in the business of providing taxable output
services under the category of consulting engineer services, erection,
commissioning and installation service, construction services other than
residential complex, including commercial/ industrial buildings or civil
structures and works contract services etc. to customers located within /
outside India. The Appellant is engaged in provision of services to its
clients which are spread in various countries. In order to provide output
services to its clients, the Appellant incurs expenditure for procuring
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SERVICE TAX Appeal No. 10661 of 2021-DB
various input services, inputs and capital goods from domestic as well as
foreign vendors. The Appellant has made payments in foreign currency
to various entities within and outside India which were recorded as
business expenditure in its books of accounts. On the basis of CERA
audit, after considering the foreign currency expenditure reported in the
annual accounts and comparing the same with the service tax returns
filed by the Appellant, the service tax authorities issued a show cause
notice dated 20.04.2017 to the appellant for recovery of service tax
demand of Rs. 10,55,33,679/- and applicable interest along with
penalty alleging that the Appellant has short paid / not paid service tax
on the payments made in foreign currencies for procuring various
services such as:
(a) Professional fee/engineering services ;
(b) License fee/subscription ;
(c) Corporate cost allocation ;
(d) Repairs and maintenance ;
(e) Consultancy fees ;
(f) Bank charges ;
(g) Other.
2. The impugned show cause notice alleged that the Appellant had
short paid service tax on the value of foreign currency expenditure as
import of services. Accordingly, the SCN sought to levy service tax on
the differential value of foreign currency expenditure reported in the
annual accounts of the company vis-a-vis the value of services on
which service tax was actually paid as import of services under
reverse charge mechanism in the service tax returns. The matter was
earlier adjudicated vide Order-in-Original dated 20.12.2017 but the
same was remanded back to the original adjudicating authority vide
CESTAT order no. A/10699/2020 dated 26.02.2020. In denovo
proceedings, after due process of law, the show cause notice
culminated into confirmation of demand under proviso to Section
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SERVICE TAX Appeal No. 10661 of 2021-DB
73(1) of the Finance Act, 1994 (hereinafter referred to as the ‗Act')
for recovery of service tax amounting to Rs. 4,94,88,067/- along with
interest under Section 75 and penalty under Section 78(1) and 77(2)
of the Act vide impugned order dated 29.01.2021. The period of
demand is 2011-12 to 2014-15. The appellant is in appeal before us
against the impugned order.
3. In the appeal memorandum the appellant has submitted that
the following services are in dispute in the present proceedings
against which the demand has been confirmed in the impugned
order:-
S. No. Nature of expense Grounds for confirming the demand
I Professional Fees/ For levy of tax on services, there is no
Engineering Cost such condition of consumption or
performance of the services in India. The
only condition is that the service should
be used in relation to business or
commerce of the recipient of such
service. The specified conditions for
discharging services tax on receipt of
services from outside India have been
fulfilled in this case.
II Corporate cost On perusing through the Assignment
allocation (Employee Agreements, Commercial Invoices and
secondment cost) Debit Notes, it has been observed that
the seconded employees are
professionally qualified as Engineers and
Highly technical person.
The deduction of TDS on the payments
made is not a criterion for non- payment
of service tax under reverse charge
mechanism.
Intentionally shown the expenses in
convertible foreign exchange in the
schedules of balance sheet to avoid
payment of service tax in India.
The Appellant received engineering
services from the group entity.
TDS has been deducted only on the INR
component directly paid by the Appellant
to the seconded employees.
III Bank Guarantee None of the Debit Notes or Invoices
Commission Charges shows any payment of service tax on
Bank Guarantee.
The service tax paid by bank on
commission charges for bank guarantee
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SERVICE TAX Appeal No. 10661 of 2021-DB
has no relation to the payments made by
Appellant to M/S Linde AG.
IV Software charges There was no documentary evidence in
(goods) the form of an invoice or a bill of entry to
support that it was goods and therefore
the Appellant's plea is required to be
rejected.
V Repairs & Appellant's contention that it was
Maintenance payment towards purchase of RSA stick is
(Performance outside entirely unconvincing as no documentary
India) evidence has been submitted by the
Appellant.
VI. Payment made to / Reason for rejection of the plea with
for respect to payment of tax to government
a. Government authorities, payment of Protective
authorities. Clothing, school fees, reimbursement of
b. Purchase of salary plus other reimbursement,
protective clothing reimbursement of relocation charges of
c. Purchase of
employees, reimbursement of insurance
Books/ Magazines charges: The Appellant has incurred the
d. School fee. expenses in relation to the taxable
e. Demurrage services of Engineering Services and
charges. hence forms part of the consideration of
f. Reimbursement the gross amount charged.
of Salary plus other
reimbursement Reason for rejection of the plea with
g. Reimbursement
respect to label dispenser is that the
of relocation charges purpose of such goods and the purchase
of employees. documents of the so called goods was not
h. Bank charges. provided.
i. Reimbursement
of insurance charges
Reason for rejection of plea with respect
j. Bank Guarantee
to demurrage charges and bank charges
Commission Charges
is that the Appellant has not submitted
h. Purchase of Label documentary evidence.
Dispenser
Reason for rejection with respect to
Purchase of Books/ Magazines is that the
same has been paid for online
subscription of magazine. Online
subscription of Magazine is not specified
in negative list.
VII Consultancy fee The expenses are incurred towards the
taxable services of Engineering
Consulting Services. All payments made
towards the Engineering
Consulting Service are liable to service
tax under RCM.
The first issue raised by the appellants is that it is essential that the
service is classified under proper category of service. Without such
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SERVICE TAX Appeal No. 10661 of 2021-DB
classification, charge of service tax does not apply. In the present case,
the Adjudicating authority has not appropriately determined the
individual nature of service against which the impugned differential
amount shall be chargeable to service tax. Hence, the demand of service
tax particularly for the period April 2011 to June 2012 when there was a
regime to tax the services under specific description and classification, is
liable to be set aside. The appellant has relied upon various judgments in
support of its contention. On going through the submissions of the
appellant, show cause notice and the adjudication order, we find that
even before the issue of show cause notice, during correspondence with
the appellant, the department had pointed out the various differences in
payments made in foreign currency in the books of account of the
appellant vis-a-vis the ST-3 returns and alleged that that the Appellant
was procuring various services from foreign vendors and was making
payments in foreign currencies towards professional fee/engineering
services, license fee/ subscriptions, corporate cost allocations, repairs
and maintenance, consultancy fees, bank charges etc. for use in
business and had short paid / not paid service tax on the same under
reverse charge. Therefore, the appellant was put to a sufficient notice of
the alleged irregularities in filing the ST-3 returns and if the appellant did
not agree to the allegations, it was incumbent upon him to specifically
contradict those allegations by reconciling the figures in books of account
and the ST-3 returns. We do not find that there was any lack of clarity
on the part of the department in determining the nature and impugned
services in the show cause notice. The appellant was clearly pointed out
the differences in books of accounts and ST-3 returns by way of
following chart :-
Expenses as per 2011-12 2012-13 2013-14 2014-15 Total
balance sheets
Professional 279445434 25001148 236095730 128762043 669304355
fee/engineering
services
License fee/subscri 93380512 89180567 163885362 216606011 563052452
tion
Corporate cost 73539299 97499449 54544196 43393881 268976825
allocation
Repairsand 814590 8707134 21082436 16592810 47196970
maintenance
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SERVICE TAX Appeal No. 10661 of 2021-DB
Consultancy fees 8622749 2814602 19188734 1581323 32207408
Bank Charges 25724675 25724675
Other 1771398 9104727 15267067 451885360 478028552
Gross as per 457573982 232307627 510063525 884546103 2084491237
Balance Sheets
Expenses as per ST- 2011-12 2012-13 2013-14 2014-15 Total
3
Consulting 188102420 27846426 242042192 124136267 582127305
Online data 94877230 99095404 190530064 234106947 618609645
retrievable
Business Support 0 12525 12525
Other than taxable 0 20000 20000
Sponsorship Service 690356 100000 790356
Gross as per ST-3 282979650 127632186 432672256 358275739 1201559831
Difference between 174594332 104675441 77391269 526270364 882931406
Balance sheets and
ST-3 returns
A total demand was raised of tax liability of Rs. Rs. 10,55,33,679/-
which has been reduced to Rs. Rs. 4,94,88,067/- in the adjudication
proceedings. Thus, there was no lack of certainity on the classification
and category of services for which the demand was raised except
those under the heading ―other‖ in the above chart. As the appellant
was asked to explain the differences during correspondence on the
audit objection, the appellant could contradict the liability, by
explaining the nature of expenditure which was not done. The split up
of these expenses was only provided during the course of adjudication
proceedings in reply to show cause notice. Thus, the appellant was
aware all along what was the nature of allegations and what was
nature of services which was pointed out in the impugned show cause
notice. In the light of above discussions we do not find any force in
the argument of the appellant that the show cause notice did not
determine nature of service and that the appellant was asked to
defend the indefensible. In the light of these observations, the case
law produced by the appellant which is solely on the basis where
there was a lack of clarity in the show cause notice in not relevant to
the facts of the case.
4. Now we examine the each of service against which the demand
has been raised:-
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SERVICE TAX Appeal No. 10661 of 2021-DB
(A) Professional Fees/ engineering services:
A (i) The Learned Counsel of the appellant has claimed that they are
engaged in providing engineering services to their group companies
outside India and availed various services outside India in relation to
provision of such export of services. Such services received by them
are either in the nature of supervision services in relation to installation /
repair of goods or in relation to immovable property. The services under
consideration have been availed by them in order to execute its work /
provide services to its client on their site located outside India. The
professional fees / engineering services on which service tax is not paid
are those services which are received by them outside India and are
consumed outside India in connection with providing the export services.
The Appellant submits that for receiving the aforementioned service, the
Appellant was issued the invoice bearing no. B012209077 dated 12
December 2012 for EUR 13,42,000/- (INR 9,17,72,871) by M/s. Linde
AG, Germany in the month of December 2012 against which payment
was made by the Appellant on 26 December 2012.the Appellant submits
that both the invoice date as well as the payment pertains to the period
after 1st July 2012, therefore, the place of supply of the said services
shall be determined as per PoPSR. Further, the Appellant has procured
the inspection and expediating services in relation to the 'Ruwais' project
executed outside India. Therefore, the place of provision of the said
services received by the Appellant is outside the taxable territory under
both the above referred rules, i.e. Rule 4(a) and Rule 5 of PoPSR. From 1
July, 2012, Section 66B of the Finance Act provides that service tax shall
be leviable on the value of service provided or agreed to be provided by
one person to another within taxable territory. Thus, only services
rendered in taxable territory is taxable. Hence, it is essential to
determine the place where the services are provided or agreed to be
provided. In order to determine whether the services are provided or
agreed to be provided within the taxable territory the Central
Government has notified PoPSR. The professional / engineering services
availed by the appellant are highly specialized in nature. In order to
provide such services, physical presence of the service provider is
utmost important and by no stretch of imagination it can be said that
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SERVICE TAX Appeal No. 10661 of 2021-DB
such services can be provided from another location. Accordingly, Ld.
Counsel of the appellant has argued that such critical and specialized
service received by them in relation to supervision of installation / repair
of goods will fall in under Rule 4(a) (performance based services) of the
PoPSR. As per Rule 4(a) of the PoPSR, place of provision of services
provided in respect of goods that are required to be made physically
available by the recipient of service to the provider of service, or to a
person acting on behalf of the provider of service, in order to provide
the service shall be the location where the services are actually
performed. As discussed above, the presence of goods is a necessity in
order to render such services. In the instant case, the goods in respect
of which, the above services are received, are located outside India.
Thus, after 1 July, 2012 since the place of provision of such services
shall be outside India and hence service tax should not be payable on
such services. Further supervision services received by them in relation
to supervision / coordination of immovable property will fall under the
purview of Rule 5 of the PoPSR. The Rule 5 of the PoPSR provides that
place of provision of services provided directly in relation to an
immovable property, including services provided in this regard by
experts and estate agents, provision of hotel accommodation by a hotel,
inn, guest house, club or campsite, by whatever, name called, grant of
rights to use immovable property, services for carrying out or co-
ordination of construction work, including architects or interior
decorators, shall be the place where the immovable property is located
or intended to be located. In the view of the above, the place of
provision of the said services received by them is outside the taxable
territory under both the above mentioned rule, i.e. Rule 4(a) and Rule 5
of PoPSR. That, even if for the sake of argument, it is assumed that
Appellant is liable to discharge service tax in F.Y. 2011-12 considering
the rule 7 of the POT Rules and rule 3(iii) of the Import of service rules
as held in the impugned order on the ground that the such service has
been received by a recipient located in India for use in relation to
business or commerce, in this respect, the Appellant would like to place
reliance on the judgment of Hon'ble Mumbai Tribunal in matter of
Genom Biotech (P.) Limited. vs. Commissioner of Central Excise
and Customs, Nashik ([2016] 71 taxmann.com 123 (Mumbai-
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SERVICE TAX Appeal No. 10661 of 2021-DB
CESTAT), wherein the Hon'ble Tribunal set aside the impugned order
and held as follows:
"15. Services that are not connected with manufacture or with the transport of
goods till the customs frontier of the country can be disassociated from use within
the country and hence would not lie within the ambit of the legal fiction of import
of services. Services that are undeniably rendered by a foreign 'service provider' in
relation to the goods sold abroad cannot be presumed to be covered by the
legislative intent to tax. To tax a service using the legal fiction of import and then
reimburse that tax because the service was not required for any activity within the
country is an exercise in futility and is contrary to the objectives of and means
devised for export promotion by the State.
18. From the context in which the appellant has entered into agreements with
the three providers who were held to be rendering 'advertising agency service' it
would appear that these are intended to relate to the activities of the appellant in
relation to export goods after their arrival in Ukraine. At no stage are they required
for any activity of the appellant in India. The service itself is not warranted except
in relation to export by the appellant and hence tax, even if leviable, is not to
burdened onto the export goods.
19. The original authority has failed to take note of the destination of the goods
manufactured by the appellant and has deemed the services rendered in Ukraine
to have been imported into India for business and commerce. From our
examination of the scheme of 'deeming of import of services' for taxation supra, it
can be reasonably inferred that the 'business or commerce' in Rule 3(iii) of Taxation
of Services (Provided from Outside India and Received in India) Rules, 2006 is not
intended tax services that are rendered in connection with business or commerce
outside the territory of India. Since the appellant has no requirement of
'advertising agency service' for manufacture and export of goods, the tax
demanded in the impugned order is not on the consideration for a service received
in India but a tax on the funds transferred in a cross-border transaction. Such a tax
is not contemplated in Finance Act, 1994. The demand of tax on the appellant is not
in accordance with law."
Thus the Ld. Counsel has pleaded that the liability of service tax on this
amount is legally not sustainable.
A (2) As against above arguments the Learned AR of the department has
re-iterated the findings in the impugned order that the appellant in
defense reply has shown to have incurred an amount of Rs.
9,17,72,871.00 during the financial year 2011-12, towards engineering
support services received for Ruwais project and they have claimed that
the services have been consumed outside India and service tax shall not
be attracted on such services for period from April 2011 to March 2012.
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SERVICE TAX Appeal No. 10661 of 2021-DB
But the invoice has been issued dated 12.12.2012 in relation to their
project in Ruwais, for the services provided during the financial year
2011-12 to the appellant. That as per proviso in Rule 7 of Point of
Taxation Rules, 2011 as existed prior to 01.04.2012 in case of
―associated enterprises‖ where the person providing the service is
located outside India, the point of taxation shall be the date of credit in
the books of account of the person receiving the service or date of
making the payment whichever is earlier." Accordingly, the taxability will
be determined in the year 2011-12. Further, the impugned services will
be covered as per the provisions of Rule 3(iii) of Taxation of Services
(Provided from Outside India and received in India) Rules, 2006, the
service tax liability in respect of "Consulting Engineering Service" falling
under Section of the Finance Act, 1994 lies on the recipient located in
India irrespective of the fact that the service has been performed in
India or consumed in India when the services have been received by a
recipient located in India for use in relation to business or commerce.
The judgment relied upon by the appellant in the case of the Hon'ble
Delhi High Court in the case of M/S Orient Crafts Limited vs. Union of
India [2006 (4) STR 81 (Del. HC) wherein the Hon'ble High Court had,
inter alia, upheld the validity of section 66A and of Import of Service
Rules. I find that the Hon'ble High Court has upheld the constitutional
validity of Section 66A and the rules framed thereunder. Therefore, the
ratio of the case law is not applicable in this issue. Accordingly the
appellant is liable for payment of service tax on the amount of Rs.
9,17,72,871.00 paid by them towards the engineering services provided
by their headquarters to the Ruwais Project, under reverse charge
mechanism as per the provisions Section 66A of the Finance Act, 1994
read with Rule 3(iii) of Taxation of Services (Provided from Outside
India and received in India) Rules, 2006.
4.1 We have carefully gone through the rival submissions. We are of
the considered view that the amount of Rs. Rs. 9,17,72,871.00 was
already booked in their accounts during the year 2011-12 and as per the
definition of ―associated enterprises‖ stated above, the amount has to
be considered to have been received in 2011-12 even though the invoice
was issued at a later stage. Further as per the provisions of Rule 3(iii) of
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SERVICE TAX Appeal No. 10661 of 2021-DB
Taxation of Services (Provided from Outside India and received in India)
Rules, 2006, the service tax liability in respect of "Consulting
Engineering Service" falling under Section 65(105)(g) of the Finance Act,
1994 lies on the recipient located in India irrespective of the fact that
the service has been performed in India or consumed in India when the
services have been received by a recipient located in India for use in
relation to business or commerce. We are not convinced that the service
can be related to in relation to the immovable property or the
performance based services which are specifically covered under Rule
3(i) and 3(ii) of the Rules 2006 ibid and which do not cover the services
under Section 65(105)(g) of the Finance Act, 1994. We find that the
similar issue has already been decided by the Tribunal in the case of
2019 (20) G.S.T.L. 259 (Tri. - Mumbai) in the case of EMI Transmission
Limited vs. Commissioner Of Central Excise, Nashik The relevant extract
of the order is reproduced below :-
"5. We have carefully considered the submissions made by both the sides. We
find that the demand of Service Tax on the Technical Testing Analysis service was
raised on the basis of Rule 3 of Taxation of Services (Provided from Outside India
and Received in India) Rules, 2006, which reads as under :
"3. Taxable services provided from outside India and received in India. -
Subject to Section 66A of the Act, the taxableservices provided from outside
India and received in India shall, in relation to taxable services,-
(i) specified in sub-clauses (d), (p), (q), (v), (zzq), (zzza), (zzzb), (zzzc), (zzzh),
(zzzr), [(zzzy), (zzzz) and (zzzza)] 1 of clause (105) of Section 65 of the Act, be
such services as are provided or to be provided in relation to an immovable
property situated in India;
(ii) specified in sub-clauses (a), (f), (h), (i), (j), (l), (m), (n), (o), (s), (t), (u), (w),
(x), (y), (z), (zb), (zc), (zi), (zj), (zn), (zo), (zq), (zr), (zt), (zu), (zv), (zw), (zza), (zzc),
(zzd), (zzf), (zzg), (zzh), (zzi), (zzl), (zzm), (zzn), (zzo), (zzp), (zzs), (zzt), (zzv),
(zzw), (zzx), (zzy), (zzzd), (zzze), (zzzf), and (zzzp) of clause (105) of Section 65
of the Act, be such services as are performed in India :
Provided that where such taxable service is partly performed in India, it shall
be treated as performed in India and the value of such taxable service shall be
determined under Section 67 of the Act and the rules made thereunder;
specified in clause (105) of Section 65 of the Act, but excluding,-
(a) sub-clauses (zzzo) and (zzzv);
(b) those specified in clause (i) of this rule except when the provision of
taxable services specified in clauses (d), (zzzc), and (zzzr) does not relate to
immovable property; and
(c) those specified in clause (ii) of this rule, be such services as are received
by a recipient located in India for use in relation to business or commerce."
As per the reading of the above Rule, it is observed that the technical testing
analysis service covered under sub-clause (zzh) received from outside India is
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SERVICE TAX Appeal No. 10661 of 2021-DB
taxable provided such service is partly performed in India. In the facts of the
present case, the testing of spacer damper was wholly performed outside India in
the foreign country by a foreign based testing agency. No part of the testing was
provided in India for the reason that the testing agency is located outside India.
Even though the goods on which test was conducted and certificate issued
therefore were received by the recipient in India but the fact remains that the
service of Technical Testing and analysis was only performed in abroad, no part of it
was performed in India. Therefore the technical testing and analysis service on the
reverse charge basis is not taxable in terms of Rule 3(iii) of Rules, 2006. The said
provision was prevailing upto 1-4-2011 as w.e.f. 1-4-2011 vide Notification No.
23/2011-S.T., dated 31-3-2011 Clause (zzh) was omitted under Rule 3(iii) of Rules,
2006. The submission of the Ld. Counsel is that even after omission of Clause (zzh)
in Rule 3(ii) of Rules, 2006. The service is not liable to tax for the reason that the
service was only performed in non-taxable territory i.e. foreign country for this
reason it is not taxable. In this regard we find that after omission of Clause (zzh)
w.e.f. 1-4-2011 Technical Testing and Analysis service even though only performed
outside India shall be liable to Service Tax as per Clause (iii) of Rule 3 of Rules, 2006,
according to which, the only requirement is that service are received by a recipient
located in India for use in relation to business or commerce. There is no dispute
that technical testing and analysis service though wholly performed outside India
but the same was received by the appellant in India which was indeed used in
relation to business or commerce. Therefore after 1-4-2011, the service of technical
testing and analysis is clearly chargeable to Service Tax."
4.2 In view of the above discussion, we hold that the professional fees/
Engineering charges which are considered under the expression
―Consulting Engineering Services' were chargeable to service tax during
the relevant period.
B. Corporate cost allocation:
The corporate cost allocation and other charges as reflected in the
schedule of foreign currency expenditure indicate the salary expenses
of employees of group companies from them some employees are
deputed in the office of the Appellant. The service provided by
employees of the Appellant (who are under employment with the
Appellant) are governed by the exclusion clause contained in the
definition of 'Service' under Section 65B(44)(b) of the Finance Act,
which provides that service provided by employees to their employers
in the course of or in relation to employment and are not liable for
service tax. Further, the Appellant has entered into tripartite contract
arrangement ('secondment contract') with such employees seconded
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SERVICE TAX Appeal No. 10661 of 2021-DB
from the group companies to the Appellant for the purpose of work of
the Appellant in India. The seconded employees work under the
complete supervision, control and management of the Appellant during
the entire period of their secondment. The functions, scope of work,
roles and responsibilities to be carried out by the seconded employees
are decided solely by the Appellant. The employees discharge their
employment by acting for and on behalf of the Appellant . The
Appellant is responsible for payment of salaries to such seconded
employees. For administrative convenience and to meet employee
requirements, Group companies, on the request made by and on behalf
of the Appellant, has agreed to disburse the remuneration of such
seconded employees outside India which will then be reimbursed by
the Appellant on a cost to cost basis to the group company. The
Appellant bears the responsibility to withhold / deposit of tax on
salaries disbursed to such seconded employees by the group
companies for the services rendered by them in India and has been
diligently deducting and depositing tax under the Income tax Act.
During secondment, the employment of seconded employees with the
group company stands suspended. During the secondment, each
employee shall be considered as an effective employees of the
Appellant and the Appellant shall provide all facilities and other
amenities as are provided to its employees and as may be required by
such Employee and by the local laws. The Company would be
responsible for complying with local labour laws as applicable to such
employee in India. In view of the above, the Appellant submits that the
group companies have not rendered any services to the Appellant.
Further, pursuant to secondment contract, employees of group
companies became employees of the Appellant and said employees
work under the complete supervision, control and management of the
Appellant during secondment. For the same, the Appellant remunerates
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SERVICE TAX Appeal No. 10661 of 2021-DB
the said seconded employee by way of payment of salary and other
benefits. In this regard, for the purpose of the administrative
convenience of the seconded employees with regard to meeting of
their requirements in their home country a portion of salary payable by
the Appellant is disbursed by group companies to the designated
overseas account of the seconded employees. The group companies
initially pays the portion of the salary costs of the seconded employees
to their designated overseas account and raise a debit note of said
amount on the Appellant. The Appellant would reimburse the group
companies for the exact actual amount paid by the group company,
based on the debit notes from the group company on a periodic basis.
The said debit notes raised by group companies represent the amounts
paid by group companies on behalf of the Appellant, to each of the
seconded employees towards salary and emoluments, for the work
performed by the seconded employees in India under the control,
supervision and as employee of the Appellant in India. The appellant
has duly deducted tax at source on the entire amount of salary
received by the seconded employees, paid in India as well in the home
country. Same is also evident from the copy of Form 16 as issued by
the Appellant to the said employees. Further, from the tax withholding
computation maintained by the Appellant of the said employees, it can
be seen that the Appellant had calculated its liability to deduct tax at
source by including income received by the employee in India as well
in-home country. Considering the underlying facts as mentioned above,
the Appellant submits that such expenditure is in the nature of salary
expenses to be paid to such employees who have been deputed in the
office of the Appellant. Learned Counsel argued that reimbursement of
costs in the form of salary expenses and social security expenses,
travel cost of the seconded employees to the group companies for
payment to the employees shall not be liable to service tax since
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SERVICE TAX Appeal No. 10661 of 2021-DB
services provided by employees to employer is outside the purview of
service tax. The learned Counsel relied upon the case law in
Commissioner of Central Excise vs. Computer Sciences Corporation
India Private Limited [2015 (37) S.T.R. 62 (All.)], Volkswagen India
(Pvt.) Ltd. vs. CCEX [2014 (34) S.T.R. 135 (Tri. - Mumbai)], he
vehemently argued that the corporate cost allocation in the nature of
reimbursement of salaries of employees paid by the Appellant to its
group companies is not liable to service tax and demand of service tax
thereupon should be dropped. Contradicting various findings in the
impugned order he argued that:
(i) It has been held in impugned order that Linde AG Engineering
division ('Parent Company') is the deciding the position or the
designation or the working responsibilities of the employees in the
"host Company".
4.3 He argued that a tripartite secondment contract is executed
between the Appellant's group company, Appellant and seconded
employee. Accordingly, the designation of the seconded employees is
decided mutually by the Appellant and the Appellant's group company.
That during the entire secondment period, the seconded employee
reports to the concerned person of the Appellant and as per the
contract, he/she needs to comply with the local conditions of
employment, and administrative procedure.
(ii) It has been held that the "Company" i.e. the reserves the right to
require the "Assignee" to undertake other duties which may reasonable
be required. The "Company" reserves the right to terminate the
assignment prior to the planned end date in the event that the
"Assignee" is not taking care of his obligations.
He argued that this clause is to safeguard the Appellant, in case the
employees who are seconded are not performing their obligation, the
Appellants can ask the Company to terminate the agreement. This
16
SERVICE TAX Appeal No. 10661 of 2021-DB
observation of learned Adjudicating authority has no relevance in
determining whether the employees were seconded, or manpower
services were provided.
(iii) It has been held The salary of the "Assignee" is split into two, one
Home Currency Element and another is Host Currency Element and
approximately 80% of the salary is paid at home country and tax
involved on the same is paid in home country, i.e. Germany, of the
employee. The "Assignee" is paid nearly 20% of their salary in India
and the income tax involved on this amount is only paid in India.
Contradicting the same he argued that the Appellant has duly deducted
tax at source on the entire amount of salary received by the seconded
employees, paid in India as well in the home county. Same is also
evident from the copy of Form 16 as issued by the Appellant to the said
employees.
(iv) It has been held that the "Appellant's group entity" will continue
to pay the applicable employer's and employee's social security
contributions in respect of the seconded employee in their home
country. The Appellant's group company continues to cover the medical
insurance of the seconded employee during the period of residence in
foreign country and the Appellant group entity also covers accident
insurance of the seconded employees and pays the premium costs.
Against this he argued that the Appellant's group company claim
reimbursement of all the payments made by them in relation to
expenses such as social security cost, insurance charges etc. for the
seconded employees which is very well apparent from the debit notes
issued by the Appellant's group company.
(v) It has been held that as per the clauses or conditions of the
Assignment Contract Appellant's group company is holding all the
powers in respect of the seconded employee during the period of stay
in India for providing the service in India. Appellant is not having any
power to control the secondee employees as claimed by the Appellant.
The seconded employees are just reporting to the Specified Persons of
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SERVICE TAX Appeal No. 10661 of 2021-DB
Appellant as specified in the assignment contract. The salary and other
emoluments and perks are decided by the Appellant's group company
and the Appellant has no control over these things. Even in case, the
seconded employee is not taking care of his obligations, the Appellant's
group entity reserve right to terminate the secondee employee and the
Appellant is having any power to terminate or revert such employees.
4.4 Ld. Counsel has further argued that The Hon'ble Supreme Court
judgment in the case of C.C.,C.E & S.T -- Bangalore (Adjudication)
ETC. vs. M/S Northern Operating Systems Pvt Ltd. [Civil Appeal No,
2289--2293 of 2021] is inapplicable in the instant case, as the facts
and circumstances based on which the decision was rendered is entirely
different and therefore distinguishable from the present facts of the
case. The Ld. Counsel argued that the Ld. Respondent has changed the
allegation with respect to the classification of the amount of corporate
cost allocation. The impugned OIO has alleged that Service Tax is
payable under reverse charge mechanism ("ROM") by the Appellant on
the amount of corporate cost allocations under the service category of
"Consulting Engineer Services". In this regard, the Appellant has made
detailed submissions vide Para E29 to E56 of the Appeal to substantiate
non-applicability of Service tax on the said reimbursements along with
additional submissions filed from time to time based on legal/ judicial
developments. However, during the course of the personal hearing
before the Hon'ble Tribunal on 12th January 2023, the department
representative alleged the nature of services to be "Manpower Supply
Services" and demanded payment of Service Tax under RCM relying
upon the decision of the Hon ble Supreme Court in the matter of M/S
Northern Operating Systems Pvt Ltd. (supra).Therefore, they are not
liable for service tax on the corporate cost allocation expense
amounting Rs. 27,10,12,363/-
4.5 Learned Counsel has argued that Appellant's group company does
not hold any power in respect of the seconded employee during the
secondment period; Group company is transferred into dormant status
during the secondment period. On completion or termination of the
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SERVICE TAX Appeal No. 10661 of 2021-DB
secondment contract, the original employment contract will revive, and
this secondment contract would expire; seconded employee is required
to report to the concerned person of the Appellant; the working hours,
public holidays of the Appellant as applicable to other employees is
applicable to them as well; the seconded employee is not permitted not
engage in any other business activities in the host country or any other
occupation undertaken for profit or gain; the salary and other
emoluments and perks are decided mutually by Appellant and
Appellant's group company; it is nowhere mentioned in the assignment
contract that the Appellant is not having any power to terminate and
revert the seconded employee.He has stated that as per assignment
agreement following clause in the agreement are relevant for
discussion: -
i. Clause I : Assignment to the Host Company.
(a) The assignment is for the period from Ist Nov. 2010 to Oct. 2012
and the "Assignee" is assigned to Linde Engineering India Pvt. Ltd.,
India. During the assignment, the "assignee" will be in a position of
the Head of Business Unit Petrochemicals Plants -- reporting to Dr.
Reinhart Vogel, Managing Director Linde Engineering India Pvt. Ltd,
India and Dr. Thomas Gruncr, General Manager. This position is a
Band 4 position.
(a) The employment contract with the "Company" will herewith be
transferred into dormant status during the assignment. On
completion or termination of the assignment, the original
employment contract will revive and this assignment contract will
expire.
ii. Clause 2 -- Required immigration/work permit -- Any
visa or work permit required shall be applied by the "Assignee" with
the assistance of the designated immigration provider of the Linde
Group and the Host Company. The host company will bear the cost of
procuring all necessary papers for entry into and residency in the
host country.
iii. Clause 3 -- Assignment Duration:
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SERVICE TAX Appeal No. 10661 of 2021-DB
(a) The assignment for a period of 2 years and extendable overall
limit of 4 years, subject to mutual agreement between assignee and
the home and host company.
(b) The "company" reserves the right to call the "assignee" back
before the planned assignment end date if required (due to e.g.
political unrest, business and organizational reasons, performance
reasons). The "company" also reserves the right to require the
"Assignee" to undertake other duties which may reasonable be
required. These duties would take into account the nature and status
of the role of appointment, qualifications and experience. If it is
necessary to end an assignment ahead of the planned end date, the
"Company" will give 3 months notice (depending on an important
reason due to the personal situation of the "Assignee" also a longer
appropriate time limit will be applied but not longer than six months)
of the impending repatriation to the "Assignee"
iv. Clause 4 -- Remuneration abroad.
(a) Salary -- The gross assignment base pay for assignment
purposes will be Euro 109800 per annum. The net assignment pay
has been calculated in accordance with the attached salary buildup
schedule. It is quoted partly in the home country and party host
country as follows:
Home Currency Element: Euro 89130 net paid out in the home
country. Host Currency Element: INR 13 18875 net paid out in the
host country.
(b) Payment delivery -- The remuneration will be transferred into
bank account to be designated by the "Assignee" in India and
Germany. There will be no reimbursement of any costs relating to
international cash transfer or exchange rate difference.
(c) Home based benefits: Home base salary (shadow income) --
Pensionable Earnings in Linde Supplementary pension system will
for year 2010 be Euro 7800 gross per month.
(d) Bonus- The bonus will be calculated on the basis of the
assignment base pay based on home bonus scheme rules. If the
bonus or a portion of it refers to the performance during the
assignment, the bonus will be paid net of hypothetical tax. The bonus
will be paid by the host company.
Clause 5 : Relocation and Repatriation
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SERVICE TAX Appeal No. 10661 of 2021-DB
(a) Shipping -- The host company will pay for the "Assignee"
house hold goods to be shipped to the host location
(b) Travel to host location -- The host company will provide
Business class airfares for the "Assignee" from the home country to
the host country.
(c) Settling in payment -- The host company provides a settling in
payment (one-time) when moving to the new host location in the
amount of net INR 3,98,210.
(d) The same rules as described above under clause 5.1 and 2 are
applicable for the repatriation.
vi. Clause 6 : Assignment Benefits.
(a) Temporary accommodation -- The host company will pay for 4
weeks' temporary accommodation at the host location, if permanent
housing is not yet available.
(b) Host Country Housing -- The cost of actual housing will be paid
by the host Company upto the amount of net INR monthly.
(c) Home Leave -- The host Company provides the "Assignee" with
the cash sum in the amount of net Euro 12,000 for a 12 months
period.
vii Clause 7 -- Working hours and holiday vacation.
The working hours and holidays of the host location are applicable.
viii. Obligation during the assignment
(a) The assignee must devote the whole of his working and
attention to the assignment. The "Assignee" is not permitted to
engage in any other business activity in the host country or any
other occupation undertaken for profit or gain.
(b) The "Assignee" will be expected to comply with local conditions
of employment and administrative procedures.
(c) The "Company" reserves the right to terminate the assignment
prior to the planned end date in the event that the "Assignee" is not
taking care of his obligations. In such case the termination will be
considered as termination by the Company for cause according to the
IA Policy.
ix. Clause 9 -- Social Security.
The "Company" will file an application to ensure that the "Assignee"
remains covered by the social security system in his home country
Germany, if possible. The "Company" will
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SERVICE TAX Appeal No. 10661 of 2021-DB
continue to pay the applicable employer's and employee's social
security contributions with respect to old age and unemployment
insurance to the home scheme. If possible, the "Company" will apply
for the exemption from the host social security scheme.
x. Clause 10 : Medical care abroad/Accident insurance for
dependents.
For the duration of Employee's residence in the foreign country,
Linde will conclude an insurance policy covering medical care abroad
with the Hallesche Insurcrs. During the assignment abroad the
"Company" will take out an accident insurance for the "Assignee" and
the "Company" will cover the premium costs.
xi. Clause 11 -- Taxation.
The assignment salary is quoted net based on the Tax Equalization
Policy of the Linde Group. The host company will meet any host tax
and social security arising from assignment salary benefits.
xii. Clause -- 14 Final provisions.
a. The "Assignee" shall inform the "Company" without undue
delay of any changes in his personal details. The "Assignee" assure
the "Company" that he can be contacted by post at the address
provided and that he will notify the "Company" without undue delay
and in writing of any changes in the address of service.
b. German law is the proper law of this agreement
On the basis of these clauses in the agreement Ld. AR has argued
that as per sample "Long Term Assignment Contract stated above
M/S Linde, AG Engineering Division (the "Company") deputes their
employees (the "Assignee") to M/s Linde Engineering India Pvt. Ltd
(the "host Company"/ appellant) for providing the service in India for
a specific period. The Company is deciding the position or the
designation or the working responsibilities of the employees in the
"host Company". The "Company" reserves the right to call the
"Assignee" back before the planned assignment end date, if required.
The "Company" reserves the right to require the "Assignee" to
undertake other duties which may reasonable be required. The
"Company" reserves the right to terminate the assignment prior to
the planned end date in the event that the "Assignee" is not taking
care of his obligations. The salary of the "Assignee" is split into two,
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SERVICE TAX Appeal No. 10661 of 2021-DB
one Home Currency Element and another is Host Currency Element
and approximately 80% of the salary is paid at home country and
tax involved on the same is paid in home country, i.e. Germany, of
the employee. The "Assignee" is paid nearly 20% of their salary in
India and the income tax involved on this amount is only paid in
India. The "Company" will continue to pay the applicable employer's
and employee's social security contributions in respect of the
Assignee in their home country. The company continues to cover the
medical insurance of the Assignee during the period of residence in
foreign country and the Company also covers accident insurance of
the Assignee and pays the premium costs. That these clauses or
conditions of the Assignment Contract that M/S Linde, AG is holding
all the powers in respect of the Assignee employee during the period
of stay in India for providing the service in India. M/S Linde
Engineering India Pvt. Ltd is not having any power to control the
"Assignee" as claimed by the assessee. The "Assignee" is just
reporting to the Specified Persons of M/S Linde Engineering India
Pvt. Ltd as specified in the assignment contract. The salary and other
emoluments and perks are decided by the Company and the host
company has no control over these things. Even in case, the
"Assignee" is not taking care of his obligations, the "Company", i.e.
M/S Linde, AG or their group companies reserve the right to
terminate the employee and the host Company, i.e., M/S Linde
Engineering India Pvt. Ltd is not having any power to terminate or
revert such employees. And above all German law is the proper law
of this agreement. That despite the fact that the re-imbursement is
made by the appellant, they do not the controlling power over the
seconded employees. all these facts conclusively prove that the
employees working in M/S Linde Engineering India Pvt. Ltd are acting
or providing service in India on behalf of their employer, i.e. M/S
Linde, AG, Germany.
4.6 Therefore, the payments under the head of corporate cost
allocation made by the appellant in foreign currency to M/S Linde, AG
and their group companies situated outside India are against the
taxable services, viz. Engineering services provided by the persons
situated outside India.
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SERVICE TAX Appeal No. 10661 of 2021-DB
That Assignment Agreements, commercial invoices and debit notes
clearly reveal that that all the seconded employees are professionally
qualified as engineers and highly technically qualified persons and
providing their service on behalf of Linde AG, Engineering Division or
their group companies and providing the service in the nature of
Consulting Engineer Service to M/s Linde Engineering India Pvt. Ltd.,
India as defined under Section 65 (31) Section 65(105)(g) of the
Finance Act, 1994 ― i.e. "any service provided or to be provided to
any person, by a consulting engineer in relation to advice,
consultancy or technical assistance in any manner in one or more
disciplines of engineering including the discipline of computer
hardware engineering 'prior to the period of 1.7.2012 and Section
65(B)(44) of the Finance Act, 1994 which defines "service" means
any activity carried out by a person for another for consideration,
and includes a declared service except certain specified transactions
or activities.
4.7. We have carefully gone through the rival submissions. On going
through the various terms of the representative assignment agreement
of the seconded employees as detailed above, there is no doubt that the
effective control over the employees deputed in India always remains
with Linde AG, Germany and the appellant has no role in their
appointment. Terms of service in India, remuneration of the employees,
social security benefits, duration of service in India are all decided by
Linde AG, Germany and as per agreement ―German Law is proper law for
the agreement‖. The invoices detailed in the adjudication order clearly
state that the services provided by the seconded employees to the
appellant are of ―consulting engineer‖. Therefore we are of the
considered view that the service agreements of the seconded employees
do not show that those are the employees of the appellant and for all
effective purpose, they remain employee of their Home Company and
merely providing services to the Company at the behest of the Home
Company i.e Linde AG, Germany. The ratio of the Apex Court judgement
in the case of 2022 (61) G.S.T.L. 129 (S.C.), C.C., C.E. & S.T.,
BANGALORE (ADJUDICATION), VersusNORTHERN OPERATING SYSTEMS
24
SERVICE TAX Appeal No. 10661 of 2021-DB
PVT. LTD is squarely applicable to the facts of the case. The Company is
effectively providing taxable service of ―Consulting Engineer services‖
defined under Section 65(105)(g) of the Finnace Act, 1994 before
01.07.2012 and taxable service under Section 66B after 10.07.2012
(C) Bank Guarantee Commission Charges:
5. Learned Counsel has stated that the remittance made by it to its
subsidiary in relation to bank guarantee commission charges pertain to
the bank guarantee obtained by Linde AG Germany (LAG), the parent
company of the Appellant on behalf of the Appellant for its various
projects. The bank guarantee is obtained by M/s. LAG from a bank
situated outside India. Since the bank guarantee is to be given for a
project in India to appellant's customer in India, the foreign bank routes
the guarantee through its Indian branch and obtains the guarantee from
an India bank. The Indian bank issues the bank guarantee in favour of
the Appellant on the basis of request given by the foreign bank. The
Indian branch of the foreign bank forwards the advice of charges of the
Indian bank issuing the guarantee as well as its own service charges to
the requesting foreign branch. The foreign bank then forwards the bank
guarantee advice to M/s. LAG including the charges levied by the Indian
bank and the Indian branch of the foreign bank. It is to be noted that
the charges levied by the Indian bank and the Indian branch of the
foreign bank would have already suffered service tax. Such charges paid
by the Appellant are reflected in the annual accounts as bank guarantee
commission charges. He further stated that the bank guarantee
commission charges, though paid by the Appellant to LAG in foreign
currency have already suffered service tax once and cannot be made
subject to service tax only due to the reason that the same has been
paid by LAG first and then reimbursed by the Appellant to LAG.
5.1 In the impugned order, the Adjudicating authority rejected the
above claim on the ground that the service tax paid by the bank on
commission charges for the bank guarantee has no relation to the
payments made by the Appellant to their parent company and the
receipt of such services are import of services and service tax is
appropriately be payable on such services. The mechanism the Appellant
have cited in their defense is the manner in which the banks situated
25
SERVICE TAX Appeal No. 10661 of 2021-DB
abroad and in India operate. The service tax paid by the bank on
commission charges for the bank guarantee has no relation to the
payments made by the Appellant to LAG and the receipt of such services
are import of services and service tax is appropriately be payable on
such services.
5.2 Appellant refers the Supreme Court judgment in the matter of
Union of India and anr. vs. M/S. INTERCONTINENTAL CONSULTANTS
AND TECHNOCRATS PVT. LTD (SUPRA), wherein it has been held that
there is no services involved in case of reimbursement of expenses. Also,
the services have actually been provided by the bank and service tax has
already been levied by the bank Therefore, the ground relied upon by
the Adjudicating authority is entirely incorrect. The Adjudicating
authority failed to appreciate the analogy drawn by the Appellant in
respect to the payments by the Appellant to their parent company where
the Appellant has established through the above submissions that the
payments made by the Appellant to their parent company are nothing
but reimbursements.
5.3 On the other hand the Ld. AR has re-iterated findings on the
adjudicating authority who has observed that copy of Debit Notes
issued by Linde, AG in favour of M/s. Linde Engineering India Pvt. Ltd
and invoices raised by Credit Agricole CIB, Deutschland to M/S Linde,
AG, Deutschland, show that they are charging correspondent cable
charges, correspondent commission, etc.; that none of these Debit
Notes shows any payment of service tax on the bank guarantees issued;
these invoices show that no service tax has been discharged on theses
invoices; prima facie these Debit Notes are raised by M/s. Linde, AG for
the services provided by them for procuring the bank guarantees;
therefore, the appellants submission that no service tax is leviable under
reverse charge mechanism on such services is contrary to facts and
against the prevailing legal provisions of charging service tax on the
services received by them from persons situated outside India;
therefore, the appellant's submission that no service tax is leviable under
reverse charge mechanism on such services is contrary to facts and
against the prevailing legal provisions of charging service tax on the
services received by them; that the payments made by the assessee
are aptly covered under the import of services and the bank guarantee
26
SERVICE TAX Appeal No. 10661 of 2021-DB
received by the appellant for its various projects in India was a service
received by them and the charges paid for it have to be taxed in India;
that the service tax paid by the banks is in no way connected to the
present issue as the appellant is the recipient of a service from M/s
Linde, AG and have paid for the same.
5.4 We find that the matter is finally settled by the Apex Court
judgement in the case cited as 2023 (73) G.S.T.L. 4 (S.C.)
COMMISSIONER OF CGST AND CENTRAL EXCISE Versus EDELWEISS
FINANCIAL SERVICES LTD. where the Hon'ble court has held that
issuance of corporate guarantee without consideration would notbe a
taxable service. Thereis no allegation in SCN or findings in the
impugned order that LAG had received any consideration other than the
re-imbursement of bank guarantee charges from the appellant.
Accordingly, we hold that no service tax is chargeable on this count and
accordingly, we don't agree with the findings of the impugned order-in-
original.
(D) Bank Charges
6. Ld. Counsel has argued that they have various overseas client
to which the services are being exported; Payment for such exports
of services is received in foreign currencies and on such remittances,
bank levies a certain amount of charges and deduct the same from
the amount remitted to the Appellant; that such banking services for
which payment has been made by the Appellant are not notified as a
service on which service tax shall be paid by the recipient of service;
that the liability to pay service tax on reverse charge mechanism for
the said service does not arise; that in the impugned order, the
Adjudicating authority has stated that if the amount has been
charged by an' Indian bank then why has the bank charged bank
charges in foreign currency for the services provided in India. In this
connection, the Appellant submits that the bank levy charges at
certain % of the foreign currency remittance and the net amount
credited to the Appellant's bank account. Therefore, the Appellant has
recorded the same in their bank details.
6.1 Ld. AR has re-iterated the findings of the impugned order that
have not submitted uny documentary evidences to prove that the
27
SERVICE TAX Appeal No. 10661 of 2021-DB
services have been provided by the Indian Banks; that, it is not
forthcoming from their defense submissions that if the amount has been
charged by an Indian bank why they have charged bank charges in
foreign currency for the services provided in India; that despite the
Hon'ble CESTAT, Ahmedabad vide Order No, A/10699/2020 dated
26.02.2020 in which they have remanded the matter to the adjudicnting
authority for passing afresh order, in view of thc appellant's submission
beforethe Hon'ble Tribunal that they are in a position to submit all
documents in support of their defense; still theappellant has not
produced any documentary evidence to substantiatetheir claim that no
service tax is leviable on the Bank charges of Rs. 1,30,167.00 paid in
foreigncurrency; therfore, the appellant is liable for payment of service
tax underreverse charge mcchanism on the cxpenditure incurred by
them in foreign currency amounting toRs. 1,30,167.00 under the head of
bank charges as per the provisions of Section 66A read withSection 66
and 68 of the Finance Act, 1994 for the period prior to 1.7.2012 under
Banking andother financial services and as per the provisions of Rule
2(d)(i(G) of the Service Tax Rules,1994 read with Section 66B and 68 of
the Financc Act, 1994 for the period from 1.7.2012.
6.2 We find that the appellant has claimed that the impugned charges
are bank commissions providing various services with respect to foreign
remittances. Service tax is already charged by the banks and only
disoute is that the appellant failed to substantiate that these amounts
are against bank charges. We remand the case back to the adjudicating
authority with the directions to the appelants to provide all supporting
documents with respect to their contention. Thus, we remand back this
issue to the Adjudicating Authority to re-adjudicate the matter after
giving opportunity to the appelalnt to submit necessary documents and
after hearing them.
Subscription / License fees
7. Ld. Counsel has argued that in order to serve its clients and
perform its duties in an effective and efficient manner the Appellant uses
various softwares; the Appellant purchases such software from its group
companies as well as third parties; a payment of Rs. 41 ,26,799.00 was
made towards purchase such softwares from their group companies;
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SERVICE TAX Appeal No. 10661 of 2021-DB
Such payments are recorded as subscription / license fees; these
softwares are classified as goods and not covered under the very
chargeability / levy of service tax is as per section 66B of Finance
Act;that payment in question has been made for purchase of goods (i.e.
software) and hence the very question of charging service tax on the
same does not arise; that in the impugned order, the Adjudicating
authority rejected the above claim on the ground that the software
contended as goods, without any corroborative evidence, is liable for
service tax and that the Appellant did not produce any documentary
evidence in the form of an invoice or a bill of entry or any other
documents to support that it was the goods. He stated that Appellant has
enclosed the listing of the sample invoices along with corresponding copy
of the invoices as evidence of the same.
7. On the contrary Learned AR has re-iterated the findings in the
adjudication order and has stated that the software is taxable prior to
the period of 1.7.2012, software has been defined as taxable service
under Section 65(105)(zzzze) of the Finance Act, 1994, the same is
read as under:
Section 65 : In this chapter, unless the contcxt otherwise requires,
-
(105) (zzzze) "taxable service" means any service provided or to be provided-
to any person, by any other person in relation to information technology software for use in the course, or furtherance, of business or commerce, including development of (i) information technology software, study, analysis, design (ii) and programming of information technology software, adaptation, (iii) up-gradation, enhancement, implementation and other similar services related to information technology software, providing advice, (iv) consultancy and assistance on matters related to information technology software, including conducting feasibility studies on implementation of a system, specifications for a database design, guidance and assistance during the startup phase of a new system, specifications to secure a database, advice on proprietary information technology software, acquiring the right to (v) use information technology software for commercial exploitation 29 SERVICE TAX Appeal No. 10661 of 2021-DB including right to reproduce, distribute and sell information technology software and right to use software components for the creation of and inclusion in other information technology software products, acquiring the right to (vi) use information technology software supplied electronically."
7.1 In respect of taxability on Software services received from 1.7.2012, the relevant provisions as under:
i. Further, as per the provisions of 66B, there shall be levied at the specified rate on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may specified.
ii. Section 65B (44) of the Finance Act, 1994 defines the term Service, mean any activity carried out by a person for another for consideration and includes a 'declared service' Further, clause (d) of section 66E (declared services) of the Finance Act, 1994, declares the following activity as a service, "development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology services ' iii. The term 'information technology software' has been defined in section 65B (28) as, "any representation of ; instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated, providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment"
iv. Further, as per clause (f) of Section 66E, a transfer of title in goods is a 'declared service' except transfers which are deemed to be sale within the meaning of clause 29A of article 366 of the Constitution.
Accordingly, the software contended as goods, without any corroborative evidence, is liable for service tax; that the appellant has not produced 30 SERVICE TAX Appeal No. 10661 of 2021-DB any documentary evidence in the form of an invoice or a bill of entry or any other documents to support that it was the goods and therefore their plea is required to be rejected.
7.2 On going through the adjudication order, we find that the adjudicating authority has confirmed the taxability as impugned services hypothetically without actually examining the nature of software from the invoices which the appellant has submitted in respect of such goods (softwares). Accordingly, we remand the matter on this issue to pass a fresh order after examining the invoices and ascertain whether the purchased software are goods or services.
(E) Repairs and Maintenance (Material purchase)
8. Ld. Counsel has argued that the expenses of Rs.536575/- reported under the head 'Repairs and Maintenance' in the financial Accounts of the Appellant includes payments made by the Appellant for the purchase of RSA Stick (i.e. goods); he challenged that the very chargeability / levy of service tax as per section 66B of Finance Act; he stated that they had provided invoices for substantiating our claim on sample basis of Rs. 347840/- Considering the same, the Adjudicating authority has set aside the demand thereupon. He prays that demand on Rs.
1,89,905/- may also be set aside with regard to these goods.
8.1 Learned AR on the other hand has submitted that as the appellant has failed to provide any documentary evidence that the balance amount of Rs. 1,89,905/- has been made in foreign currency was on account of purchase of software, service tax is to be levied on the same under reverse charge mechanism.
8.2 We are of the considered opinion that under the service tax law all payments received or paid to the foreign parties by the assessees against any service provided/ received from abroad (i.e other than goods, immovable property or money/actionable claims) are subject to tax unless those are brought under specific exception. Once a 31 SERVICE TAX Appeal No. 10661 of 2021-DB discrepancy has been brought to the notice of the assessee for a particular amount, onus lies upon him to prove that the amount was not taxable. Having failed to prove that the amount received in foreign currency was not subject to tax liability, we uphold the demand of service tax in this regard.
(F). OTHERS
9. The Appellant submits that the payments made under the head 'others' are in relation to various types of expenses such as:
Particulars Amount (in Rs.)
Total amount of expense falling under Others
category 16499808
Particulars Amount (in Rs.)
Payment of tax to government authorities 6412905
Purchase of protective clothing 37564
Purchase of books and magazines 94570
Reimbursement of insurance charges 1071014
Reimbursement of relocation charges of
663426
employees
School fees for the children of the employees 1034328
Corporate cost allocation and other
724151
reimbursements
Bank Guarantee Commission charges 4999466
Bank charges 130167
Purchase of label dispenser 29689
Conference & meeting 178056
Demurrage charges 24860
Sundry expense 1096353
Unreconcilable expense 3259
Total 16499808
(i) Payment of tax to government authorities
9.1 The Learned Counsel has submitted that this amount was paid by
the Appellant to foreign government for the income earned by its employees by way of salary in foreign country as per the Income Tax laws of the said foreign country; that these expenses are towards employees who were sent abroad for execution of the contract outside India. For F.Y. 2014-15, this expense has been classified under the head 32 SERVICE TAX Appeal No. 10661 of 2021-DB 'Professional Fees/ engineering services; that tax payments made to foreign government authorities by the Appellant in relation to salary earned by its employees as per taxation laws of the said foreign country has not been classified as a taxable service. for the period April, 2011 to June,2012.For the period after 01.07.2012, he has argued that the said payment by the Appellant for the income tax on the income earned by its employees as per the Income Tax laws of the said foreign country is neither a consideration nor the payment has been made in relation to a service provided by the foreign government authorities. There is no underlying supply for the expense incurred in this regard. The nature of payment paid by the Appellant is merely a tax payment. The Appellant wishes to reiterate the fact that the payment has been made for compliance of a law being in force in a foreign country and not for a service provided by the government of the said foreign country and hence the said payment fails the very test of being regarded as a consideration towards receipts of any service.
9.2 On the other hand Learned AR has argued that the Appellant has not submitted any invoices or contracts or any other documents in support of their claim that the same are not taxable in India. Further, the Adjudicating authority found that the submission of the Appellant has not made any reason for, why the Appellant have made payments of tax to the foreign governments on the income earned by their employees in the foreign country. It was observed that the tax collected by any government on the income earned by employee is paid by the employee by himself/herself. If the tax on income earned by the employee is paid by the Appellant, then it has to be included to his income or the payments of the services provided by them.
9.3 We find that in the impugned order it has been discussed that in order to ascertain the correctness of their submission, the adjudicating authority has gone through the list as per the Annexure-G and assessment orders submitted along with their defense reply. On going through list, it has been mentioned the name of persons, amount paid, legal position, remarks, etc. In remarks column of the Annexure-G, it has been shown as salary. That, all the so called assessment orders submitted by the appellant are in German language and he is not 33 SERVICE TAX Appeal No. 10661 of 2021-DB proficient in German language. Therefore, he could not analyse the contents of the assessment orders submitted by the appellant.
9.4 We find that the adjudicating authority his merely proceeded on assumption and presumption to the taxability and nature of taxes paid by the appellant to the governments abroad without ascertaining the actual contents of the assessment orders. Merely for the reason that the assessments orders were in German, the adjudicating authority should not have proceeded on presumptions. He should have asked the appellant to provide English Translation of the assessment orders or should have taken assistance of the private translators to arrive at the true nature of the taxes paid by them. Accordingly, we are constrained to remand back the matter on this issue also to decide the matter afresh. The appellants should provide all the relevant documents, contracts, invoices etc. to arrive at the actual nature of these taxes.
(ii) Purchase of Potective Clothing
10. The Learned Counsel has argued that the expenses reported under the head 'Others' in the financial statements of the Appellant also include reimbursements made by the Appellant to its group companies for the purchase of protective clothing and were not taxable under the Finance Act, 1994; that the Adjudicating authority has set aside the demand on the value of protective clothing amounting to Rs. 48,893/- and confirmed the demand on the value amounting to Rs. 37,464/- on the ground that this is in relation to the engineering services provided by the seconded employee and therefore, the assessee has to take into consideration the gross amount charged by the service provider for providing the taxable services in India for payment of service tax on the services received from outside India; that this is merely a reimbursement of the expenses incurred by Linde AG. He referred the Hon'ble Supreme Court judgment in case of UNION OF INDIA AND ANR. V. M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [2018 (3) TMI 357- SUPREME COURT that service tax is not applicable on the reimbursement of expenses on the ground that there is no service element involved therein. He further argued that even if for the sake of argument, it is assumed that the underlying expense would form part of the gross amount charged for providing engineering services by the group entity, 34 SERVICE TAX Appeal No. 10661 of 2021-DB then even in that case no service tax is levied on the corporate cost allocation expense.
10.1 The Ld. AR on the other hand has argued that whereas invoice no. 33084010 dated 27.08.2013 issued by Cryostar SAS to M/s Cryostar India, Division of M/s. Linde Engineering India Pvt. Ltd., was issued for Working Clothes and they have charged 597.57 Euro (INR 48893.00), the same has been issued for purchase of goods and the service tax demand has already been dropped in the adjudication order But a Debit Note No. 8026180 dated 05.11.2013 was issued by SELAS --Linde GMBH to M/s Linde Engineering India Pvt. Ltd , wherein they have charged 38029.50 Euro towards "Engineering Services for LEI by Mr. Arnold Ulsperger from 06/2013 until 10/2013 and 11160.14 EURO towards Travel costs for Mr. Amold Ulsperger and 440.83 Euro towards Protective Clothing. From the debit note no. 8026180 dated 05.11.2013, it is clear that the amount of 440.83 (INR 37,464.00) is charged in the bill along with the charges for Engineering Services provided to LEI by Mr. Arnold Ulsperger from 06/2013 until 10/2013. Therefore, the amount of Rs. 37,464.00 charged by SELAS --Linde GMBH liable to be included in the assessable value of taxable service, viz. Engineering Services received by them from Mr. Arnold Ulsperger. Further, as per the provisions of Section 67 of the Finance Act, 1994, where service tax is chargeable on any taxable service with reference to its value, then such value shall be the gross amount charged by the service provider for such service provided or to be provided by them. Therefore, the payments made by them under the heading of purchase of protective clothing (under "Others") amounting to Rs. 37,464.00 are liable for service tax under reverse charge mechanism alongwith other payments mentioned in the Bill.
10.2 We have a considered the submissions and are of the view that since the services provided by the seconded employees have already been held to be taxable under the service tax provisions as ‗Consulting engineer services' , the protective clothing will form part of the gross amount to be taxed in terms of Section 67(c) of the Finance Act. Therefore, the demand has been correctly confirmed.
35SERVICE TAX Appeal No. 10661 of 2021-DB
(iii) Purchase of books magazines -- Rs. 94.570/-
11. Ld. Counsel has argued that expenses reported under the head 'Others' in the financials of the Appellant also include payment made to vendors for procurement of literature, newspaper, magazines and books and not taxable under the Finance Act, 1994; that Adjudicating authority held that based on the description of the invoice, the underlying expense pertains to the online subscription of magazine and not for the purchase of books or magazines claimed by the Appellant and that the Online subscription to magazine is not declared in the negative list of services as per the provisions of 66D of the Finance Act, 1994; that as per section 65(75) of the Finance Act, 1994, which reads as 'On-line information and database access or retrieval' means providing data or information, retrievable or otherwise, to any person, in electronicform through a computer network. ' and as per Para 5-9-5 of the Service tax education guide which reads as 'Online information and database access or retrieval services" are services in relation to online information and database access or retrieval or both, in electronic form through computer network, in any manner. Thus, these services are essentially delivered over the internet or an electronic network which relies on the internet or similar network for their provision. The other important feature of these services is that they are completely automated, and require minimal human intervention. Examples of such services are:-
(ii) digitized content of books and other electronic publications, subscription of online newspapers and journals, online news. flight information and weather reports;
the underlying expense can be classified under the category of 'On-line information and database access or retrieval service' ('OIDAR services); that for the period April 2011 to June 2012, the Appellant relies on the judgment of ROYAL WESTERN INDIA TURF CLUB LTD. VS COMMR. OF S.T., MUMBAI [2015 (38) S.T.R. 811 (TRI. - MUMBAI)-wherein it has been held that as an essential for service tax to be levied, the service has to be classified under proper category of service, without such classification, charge of service tax does not apply; in the present case, the impugned order has not specified the category of service in which 36 SERVICE TAX Appeal No. 10661 of 2021-DB the impugned differential amount shall be chargeable to service tax. Hence, the demand of service tax for the period April 2011 10 June 2012 is liable to be set aside; that whether the services qualify as import of services as per the Import of service rules, the impugned order is absolutely silent on the conditions that are to be satisfied for import of service under the said rules that it is settled law that if the impugned order does not spell out the basis of allegation then the same is liable to be set aside. He further argued that For the period subsequent to July 2012, determination of place of provision of the any services has become relevant in order to determine taxability of the said service; that Service tax is leviable on the value of service provided or agreed to be provided by one person to another within taxable territory. Thus, only services rendered in taxable territory is taxable; that as per Rule 9(b) of PoPSR, the place of provision of service for OIDAR shall be the location of service provider and service provider for the underlying service is situated outside India; that accordingly, the place of provision of service is outside the taxable territory; hence, the question of levy of service tax does not arise.
11.1 The Ld. AR has argued that the invoices have been issued or charged for online subscription of magazine and not for sale or purchase of book or magazines as claimed by the assessee; that as per Section 65B (44) of the Finance Act, 1994 any activity carried out by a person for another for consideration and includes a declared service but shall not include the service falling under negative list that The Online subscription to magazine is not declared in the negative list of services as per the provisions of 66D of the Finance Act, 1994 and therefore taxable under the Finance Act, 1994.
11.2 We have a considered view that the adjudication order has failed to specify for the period before 1.7.2012, that the impugned service was covered under any of the specified services. Therefore, they cannot be considered to be taxable before 01.07.2012. Further, the impugned service was duly covered under Section 65(72) under ODIAR services which were taxable at the end of service provider. As the service providers were outside India, the service cannot be taxed in India. We therefore set-aside the demand for the service under the head ―Purchase of books and magazines‖.
37SERVICE TAX Appeal No. 10661 of 2021-DB
(iv) Other
(a) REIMBURSEMENT OF INSURANCE CHRGES
(b) REIMBURSEMENT OF RELOCATION CHARGES OF EMPLOYEES
(c) SCHOOL FEES
(d) REIMBURSEMENT OF SALARY PLUS OTHER REIMBURSEMENT
(a) REIMBURSEMENT OF INSURANCE CHRGES
12. The Ld. Counsel has argued that the employees of group companies of the Appellant come on secondment and work in India; as per the employment contract which binds the Appellant and the employees of the Appellant in employer employee relationship, the Appellant is bound to reimburse health insurance premium paid by the group company of the Appellant to the insurance company situated outside India; the said payment has not been made by the Appellant for availing any services; that such payments have been made pursuant to the employment contract between the employees of the Appellant and the Appellant. The said payments have been made purely under employer employee relationship. Hence, the question of levy of service tax does not arise.
(b) REIMBURSEMENT OF RELOCATION CHARGES OF EMPLOYEES 12.1 The Ld. Counsel has argued that the employees of group companies of the Appellant come on secondment and work in India; that since the employees relocate themselves from a country other than India to India pursuant to the contract of employment with the Appellant. The said employees incurred a certain amount of expenses while settling in India which the Appellant reimburses such expenses incurred by the said employees while relocating to India, these payments have not been made by the Appellant for availing any services that such payments have been made pursuant to the employment contract between the employees of the Appellant and the Appellant.
(c) SCHOOL FEES 38 SERVICE TAX Appeal No. 10661 of 2021-DB 12.2 The Learned Counsel has argued that the head 'Others' in the financials of the Appellant also include school fees paid for the children of employees working in India; that the Appellant pays school fees of children of the said employees to a school situated in India; that the said fees is paid in foreign currency to a school situated in India; that the Appellant wishes to rely on the case of Hindustan Coca Cola Beverages Private Limited wherein it has been held that for levying of service tax under reverse charge mechanism, Revenue has to first identify the taxable service received from abroad for which payment was made in foreign currency, which, as seen from the paragraphs of the impugned order quoted above, has not been done at all. This is clearly fatal. It can be nobody's case that any amount spent in foreign exchange is liable to service tax under reverse charge mechanism; such expenses have to be shown to be related to import of taxable service. Even so, the Appellant has on its part stated that the expenditure relating to purchase of foreign exchange, school fees for American Embassy School, training and development on foreign locations, travel arrangement for foreign expatriates and employee benefits are not liable to service tax .... . He has further argued that that the service provider, i.e., school in the present case is situated in India, i.e., taxable territory, hence, liability to pay tax under reverse charge basis as per Notification No. 30/2012 dated 20 June, 2012 does not arise and the impugned services have been specifically excluded from levy of service tax by virtue of clause (l) of section 66D of the Finance Act. Hence, the liability to pay tax on the said services under consideration does not arise.
(d) REIMBURSEMENT OF SALARY PLUS OTHER REIMBURSEMENT 12.3 The Learned Counsel has argued that that the payments made by the Appellant are either of the nature of corporate cost allocation or reimbursement of expenditure incurred by employees or not in relation to expenses leviable to service tax; that the Appellant would also like to submit that as per the provisions of the Finance Act, the underlying 39 SERVICE TAX Appeal No. 10661 of 2021-DB expenses would be covered under employee-employer relationship and hence the liability to pay service tax does not arise.
12.4 On the other hand Learned AR has reiterated the findings in the adjudication order that all these expenses i.e. ―REIMBURSEMENT OF INSURANCE CHRGES‖, ―REIMBURSEMENT OF RELOCATION CHARGES OF EMPLOYEES‖, ―SCHOOL FEES‖ and ―REIMBURSEMENT OF SALARY PLUS OTHER REIMBURSEMENT‖were incurred by them in corporate cost allocation and that the said expenses were made by them towards the taxable services, viz. Consultancy Services received by them from the persons situated outside India and they are liable for payment of service tax under reverse charge mechanism; that all the payments made by them in relation to the Engineering Consulting Services received by them are liable for payment of service tax. They were taxable under the heading corporate cost allocation towards the taxable services of ―Consulting Engineering Services‖ 12.5 We have already discussed under the heading ―Corporate Cost allocations‖ that the relationship between the seconded employees and the appellant was not covered under the exclusion clause contained in the definition of 'Service' under Section 65B(44)(b) of the Finnace Act, 1994 as the employee-employer relationship. Accordingly. We uphold the that the REIMBURSEMENT OF INSURANCE CHRGES , REIMBURSEMENT OF RELOCATION CHARGES OF EMPLOYEES, SCHOOL FEES and REIMBURSEMENT OF SALARY PLUS OTHER REIMBURSEMENT as discussed above were chargeable to service tax.
Demurrage charges
13. The Ld Counsel has argued that the expenses reported under the head 'Others' in the financials of the Appellant also include demurrage charges paid to ports situated outside India; that such payments made to the port authorities are for delay in lifting goods from the port situated outside taxable territory; that such charges has been paid for using the storage facility available at the port during the period 2014-15; considering the underlying nature of the said services it is evident that such services will be covered under Rule 5 of PoPSR. Rule 5 of the PoPSR provides that place of provision of services provided directly in relation to 40 SERVICE TAX Appeal No. 10661 of 2021-DB an immovable property, including services provided in this regard by experts and estate agents, provision of hotel accommodation by a hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable property, services for carrying out or co- ordination of construction work, including architects or interior decorators, shall be the place where the immovable property is located or intended to be located; that the place of provision of such services shall be outside India and hence service tax should not be payable on such services.
13.2 The Departmental Representative on the other hand has reiterated the findings in the impugned order that they have not submitted any documentary evidences to prove that the payments have been made for demurrage charges to the port authorities situated outside taxable territory; that the Hon'ble CESTAT, Ahmedabad vide Order No. A/10699/2020 dated 26.02.2020 has remanded the matter to the adjudicating authority for passing afresh order, in view of the appellant's submission before the Hon'ble Tribunal that they are in a position to submit all documents in support of their defence; that as per findings in the adjudication order, still the appellant has not produced any documentary evidence to substantiate their claim that no service tax is leviable on the expense of Rs. 24,860.00 as demurrage charges paid in foreign currency.
13.3 We are of the considered opinion that under the service tax after law all payments received or paid to the foreign parties by the assessees against any service provided/ received from abroad (i.e other than goods , immovable property or money/actionable claims) are subject to tax unless those are brought under specific exemption. Once a discrepancy has been brought to the notice of the appellant for a particular amount, onus lies upon him to prove that the amount was not taxable. Having failed to prove that the amount paid in foreign currency was not subject to tax liability, we are of the view that service tax is leviable after 01.07.2012 on such payments.
Purchase of Dispenser - Rs. 29689/-
14. The Learned Counsel has argued that under the head 'Others' in the financials of the Appellant also include payment made for purchase of i.e., label Dispenser i.e. purchase of goods and not liable to service tax 41 SERVICE TAX Appeal No. 10661 of 2021-DB which are not leviable to service tax; that the Appellant has enclosed the listing of the sample invoices along with corresponding copy of the invoices for reference.
14.1 Learned AR has argued that they did not provide any documentary or material evidence in support of their claim during the course of adjudication, hence their plea cannot be accepted.
14.2 We are of the considered opinion that the matter needs to be remanded to the adjudicating authority to pass a fresh order after examining the invoices.
Conference and meeting - Rs. 1,78,005/- Sundry expenses:
10,96,353/- and Unreconcilable expenses: Rs. 3,259/-
15. Ld. Counsel has argued that the Adjudicating authority has confirmed the demand on the said expenses on the ground that the Appellant has not given any submission or any documentary evidences why no service tax is payable on the same; that in order to levy the service tax on a particular service, it has to be first established that the said service falls under the ambit of taxable service and it also needs to be determined as to who is liable for payment of service tax; that the impugned order has failed to explain as to why the services provided by the Appellant would be liable to service tax; mere recording of certain expense in the books of accounts as foreign currency expenditure does not in any manner lead to a conclusion that the appellant has imported a particular service. Therefore, the Appellant submits that the impugned order is liable to set aside.
15.1 The Learned AR has argued that nonpayment of service tax on the expenditure incurred towards the receipt of taxable services without assigning any specific reason is not permissible under the law; that these expenditures incurred by the assessee in foreign currency have been made against the taxable services received from the persons situated at abroad and therefore, assessee is liable for payment of service tax on the amount of Rs. 12,77,668.00 under reverse charge mechanism as per the provisions of Section 66A read with Section 66 and 68 of the Finance Act, 1994 for the period prior to 1.7.2012 and as per the 42 SERVICE TAX Appeal No. 10661 of 2021-DB provisions of Rule 2(d)(i)(G) of the Service Tax Rules, 1994 read with Section 66B and 68 of the Finance Act, 1994 for the period from 01.07.2012.
15.2 We are of the considered opinion that under the service tax law after 01.07.2012 all payments received or paid to the foreign parties by the assessees against any service provided/ received from abroad (i.e other than goods, sale of immovable property or money/actionable claims etc.) are subject to tax unless those are brought under specific exception. Once a discrepancy has been brought to the notice of the assessee for a particular amount, onus lies upon him to prove that the amount was not taxable. Having failed to prove that the amount paid in foreign currency was not subject to tax liability, we uphold the demand of service tax in this regard.
16. The learned Counsel has also contended that the impugned show cause notice is hit by time limit provided under Section 73 of the Finance Act, 1994 as the appellant - assessee was audited by the Department at some point of time. In this regard we find that there are several layers of suppression and mis-representation of facts with a motive to avoid service tax. These layers of suppression cannot be detected by mere mundane audit of financial records. We therefore hold that extended time period for demanding service tax has rightly been invoked in this case.
17. The appeal is disposed of in above terms mentioned under each area of demand of service tax.
(Pronounced in the open court on 06.11.2023 ) (Ramesh Nair) Member (Judicial) (C L Mahar) Member (Technical) KL