Custom, Excise & Service Tax Tribunal
M/S Life Care Medical Systems vs Commissioner Of Service Tax, Mumbai-Ii on 3 March, 2016
IN THE CUSTOMS, EXCISE AND SERVECE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. I APPEAL NO. ST/69/12-Mum (Arising out of Order-in-Original No. 15/ST-II/WLH/2011 dated 21.11.2011 passed by the Commissioner of Service Tax, Mumbai-II.) For approval and signature: Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical) =====================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ===================================================== M/s Life Care Medical Systems Appellant Vs. Commissioner of Service Tax, Mumbai-II Respondent Appearance: Shri G. Natarajan, Advocate for Appellant Shri S.R. Nair, E.O. (A.R.) for Respondent CORAM: HONBLE SHRI M.V. RAVINDRAN, MEMBER (JUDICIAL) HONBLE SHRI C.J. MATHEW, MEMBER (TECHNICAL) Date of Hearing: 03.03.2016 Date of Decision: 03.03.2016 ORDER NO. Per: M.V. Ravindran:
This appeal is directed against Order-in-Original No. 15/ST-II/WLH/2011 dated 21.11.2011 passed by the Commissioner of Service Tax, Mumbai-II.
2. The issue involved in this case is whether the appellant is liable to discharge Service Tax liability under the category of Business Auxiliary Services as defined under the provisions of Section 65(19) of the Finance Act, 1994. The appellant herein is engaged in the business of promoting, marketing, canvassing, procuring orders from various customers in India viz. Gujarat, Maharashtra, Madhya Pradesh and Goa for the medical equipments manufactured by M/s Viasys International Corporation; and also carries out after sales services like installation and commissioning, customer care services, warranty services during the warranty period, to the customers located in India in relation to the products of Viasys. It is the case of the Revenue that the appellant, on commission received from overseas company, is liable to pay Service Tax under Reverse Charge Mechanism. The lower authority has relied upon the definition of the Business Auxiliary Services. Coming to such a conclusion having to the authority confirmed the demand along with interest and also imposed the penalties.
3. Learned Counsel would submit the issue is no more res integra as majority order in case of Microsoft Corporation (I) (P) Ltd. 2014 (36) STR 766 (Tri.- Del.) and M/s Mapal India Pvt. Ltd. 2010-TIOL-1821-CESTAT-BANG has held that such an activity is not taxable under Business Auxiliary Services. He would also relied upon the judgement of Hon'ble Bombay High Court in the case of CST Vs. SGS India Pvt. Ltd. 2014 (34) STR 554 (Bom.) which is more or less on the same issue.
4. Learned Departmental Representative reiterates the findings recorded by the adjudicating authority.
5. On careful consideration of the submissions made by both sides and perusal of the records, we find that there is no dispute that the appellant herein is engaged in the business of canvassing, promotes, markets, does after sale services to products manufactured by M/s Viasys International Corporation to the customer located in India, for which is an amount is received as commission for such services rendered. It is to be noted that there is also no dispute that the appellant has received commission in convertible foreign exchange for the period of tax liability from 01.07.2003 to 31.03.2008.
6. We find the issue is no more res integra as the service is rendered by the appellant on the goods which was manufactured by overseas manufacturer. It would mean the services rendered by the appellant is to an overseas manufacturer on whom Service Tax liability does not arise. The service rendered to such a person situated based at overseas Service Tax liability arises on him but under reverse charge mechanism appellant is made liable to pay, however in this services are consumed by a person not in India, no Service Tax liabilities arises on appellant is the law settled which is supported by judgement of Hon'ble Bombay High Court in the case of SGS India Pvt. Ltd. (supra), we reproduce the relevant paragraphs:-
21.?The definition of the term taxable service is inclusive. It also includes technical testing and analysis [see Section 65(106)(zzh)]. By Section 65(106), technical testing and analysis has also been defined. In such circumstances, when technical inspection and certification is also a service and goods in question have been inspected or tested, but the services were of the nature noted by us above, the payment was also made in terms aforesaid, then, the benefit of the notification at page 17 of the paper book was available. That was on the footing that the services rendered were exempt from whole of the liability to pay Service Tax.
22.?The circular dated 25th April, 2003 (Annexure A2) is issued on the subject of non-levy of Service Tax on export of services. It has referred to earlier circular of 1st March, 2003 and 9th April, 1999. The 9th April, 1999 is a notification of exemption. The April 2003 circular clarifies that Service Tax would be levied on all taxable services consumed or rendered in India, irrespective whether the payment thereof is received in foreign exchange or not. Since representations were received by the Board with regard to the withdrawal of the Notification No. 6 of 1999, exports of service would be affected as it would be costlier in the international market, that the board clarified that service consumed/provided in India in the manufacture of goods which are ultimately exported, no credit of Service Tax paid can be availed or reimbursed till April, 2003 because inter-sectoral tax credit between service and goods are not allowed. Mr. Sridharan has placed reliance on clause (4) of the circular dated 25th April, 2003. That is where it has been clarified that the question of taxability of secondary services which are used by primary service provider for the export of services. Thas been clarified in paragraph No. 4 of its circular. It is in these circumstances that we are of the opinion that the Tribunal has not erred in law in holding that the services provided by the respondent were not taxable. This aspect once becomes more clear if one peruses the Notification No. 21/2003-S.T., dated 20th November, 2003.
23.?We are of the opinion that the services rendered in the present case are fully covered by the clarification given and even by the principle laid down in the decision of the Honble Supreme Court of India. In this regard, if one refers to the allegations in the show cause cum demand notice, it is apparent that the same refers to the testing charges received by the respondent in convertible foreign currency in respect of services rendered by it in India to its foreign clients. Though the show cause notice refers to the circulars, what is apparent from the judgment of the Honble Supreme Court in the case of All India Federation of Tax Practitioners v. Union of India, 2007 (7) S.T.R. 625 that Service Tax is a tax on each activity. When it comes to a Service Tax on professions, the services rendered are of advise and hence, the Honble Supreme Court with regard to the nature of the tax concluded that it is rendered by a Chartered Accountant, for example when he advises his client or audits his account. Similarly, a cost accountant charges his client for advise as well as doing his work of costing. For each transaction or contract, Chartered Accountant/Cost Accountant renders professional based services. However, Mr. Sridharan submits if the taxable event is the provision of services, then, the place where the services have been rendered is of significance. The services will be taxable only if they are provided within India. Mr. Sridharan submits that Service Tax is a destination based consumption tax and therefore, it is not applicable on export of services.
24.?In the present case, the Tribunal has found that the assessee like the respondent rendered services, but they were consumed abroad. The clients of the respondents used the services of the respondent in inspection/test analysis of the goods which the clients located abroad intended to import from India. In other words, the clients abroad were desirous of confirming the fact as to whether the goods imported complied with requisite specifications and standards. Thus, client of the respondent located abroad engaged the services of the respondent for inspection and testing the goods. The goods were tested by the respondents in India. The goods were available or their samples were drawn for such testing and analysis in India. However, the report of such tests and analysis was sent abroad. The clients of the respondent were foreign clients, paid the respondent for such services rendered, in foreign convertible currency. It is in that sense that the Tribunal holds that the benefit of the services accrued to the foreign clients outside India. This is termed as export of service. In these circumstances, the Tribunal takes a view that if services were rendered to such foreign clients located abroad, then, the act can be termed as export of service. Such an act does not invite a Service Tax liability. The Tribunal relied upon the circulars issued and prior thereto the view taken by it in the case of KSH International Pvt. Ltd. v. Commissioner and B.A. Research India Ltd. The case of the present respondent was said to be covered by orders in these two cases. To our mind, once the Honble Supreme Court has taken the view that Service Tax is a value added tax which in turn is destination based consumption tax in the sense that it taxes non-commercial activities and is not a charge on the business, but on the consumer, then, it is leviable only on services provided within the country. It is this finding and conclusion of the Honble Supreme Court which has been applied by the Tribunal in the facts and circumstances of the present case. We also find that the identical view has been expressed by the majority decision of Tribunal in the case of Microsoft Corporation (I) (P) Ltd. (supra).
7. In view of the foregoing and in the facts and circumstances of this case, we hold that the impugned order is unsustainable and liable to be set aside and we do so. The impugned order is set aside and appeal is allowed.
(Operative portion of the order pronounced in open Court) (C.J. Mathew) (M.V. Ravindran) Member (Technical) Member (Judicial) Sp 6 APPEAL NO. ST/69/12-Mum