Custom, Excise & Service Tax Tribunal
M/S. Nagarjuna Oil Corporation Ltd vs Commissioner Of Central Excise, ... on 14 June, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/41069/2013
[arising out of Order-in-Original No.01/2013 (C) (ST) , dated 06.02.2013 passed by the Commissioner of Central Excise, Puducherry]
M/s. NAGARJUNA OIL CORPORATION LTD.
APPELLANT
Versus
COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY
RESPONDENT
Appearance:
For the Appellant Shri Raghavan Ramabhadran, Adv.
For the Respondent Shri K. P. Muralidharan, AC (AR) CORAM:
Honbe Shri D.N. Panda, Judicial Member Honble Shri B. Ravichandran, Technical Member Date of hearing/decision 14-06-2016 FINAL ORDER NO. 41015 / 2016 Per B. Ravichandran:
The present appeal is against order dated 06.02.2013 of Commissioner of Central Excise, Puducherry. The appellant is engaged in setting up a project for refining crude to petroleum products. In this connection, they have entered into an agreement with M/s. CB&I Lummus Crest Ltd., Netherlands [formerly known as M/s. ABB Lummus Crest Ltd.,) to avail Project Management Services. The said company later assignment the agreement to M/s. Netherland Operating Co., BV, Netherlands (NOC BV). NOC BV has established a Branch in India recognized by RBI, Income-tax and Company Law. The Indian establishment of NOC BV is also registered with service tax. The issue involved in the present appeal is that the appellant in terms of the agreement as stated above availed Project Management Services from NOC BV through their Indian establishment. The Revenue entertained a view that as the appellants contract is with NOC, BV, Netherlands and the consideration is paid to the said Netherland entity in foreign exchange, initiated proceedings to demand and recover service tax in terms of Section 66A of the Finance Act, 1994 on reverse charge basis. The proceedings concluded in the impugned order wherein, the original authority confirmed the service tax demand of Rs.2,87,26,696/- for the period 2009-10 to 2010-11 and imposed equal amount of penalty on the appellant under Section 78.
2. The learned counsel for the appellant assailed the impugned order mainly on the following grounds:-
(a) Provisions of Section 66A has no application in their case. Though the agreement is with NOC BV, Netherlands, the services are rendered through Indian establishment of NOC BV, who raised the bills for the services along with the service tax applicable. This much has been recognized by the department also. The value for services are remitted to NOC BV, Netherlands as per the arrangement whereas the service tax for that value has been remitted to NOC BV, India, who in turn deposited the tax with the Government, as provider of service. In these admitted facts, the question of reverse charge tax liability has no application.
(b) The service tax paid by NOC BV, India as a provider of service clearly shows that there is no import of service. The permanent establishment of a foreign contract holder has provided services in India. Further, the tax payment by Indian entity has not been disputed. Such tax remittance has been confirmed by the jurisdictional officer vide his letter dated 15.12.2014 addressed to Commissioner (AR), CESTAT.
(c) The imposition of equal penalty under Section 78 is totally untenable and without support of law.
3. The learned Authorised Representative opposed the submissions of the appellant and reiterated the findings of the original authority. He submitted that when the agreement and the understanding is between NOC BV, Netherlands and the appellant, the mere existence of an establishment of a service provider in India will not take away the liability of the appellant under Section 66A.
4. We have heard both sides and examined the records in detail.
5. The only point for determination is the appellants liability to service tax on reverse charge basis in terms of Section 66A. The admitted facts are that there is an agreement between the appellant and NOC BV, Netherlands. NOC BV, Netherlands has an establishment in India recognized by various authorities in terms of applicable regulations. The Indian establishment of NOC BV, Netherlands have registered themselves with the service tax department and remitted the full tax liability with reference to the impugned contract. The original authority while taking cognizance of the existence of NOC BV in India, proceeded to confirm the service tax demand on the basis that the agreement is with NOC BV, Netherlands and the consideration is paid in foreign exchange. We find that Explanation 1.- under Section 66A stipulated that a person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. In the instant case, NOC BV Netherlands is admittedly having a business establishment in India recognized by various law. The service is rendered through such establishment in India. This much has been recognized by the original authority in para 20 of his order. The reliance placed by the original authority on Boards Circular dated 06.05.2011 is misplaced. The said Circular is not on the scope of Section 66A. We find that the original authority has misdirected in his finding despite of his recognition of the Indian establishment of NOC BV as service provider.
6. Considering the above discussions and findings, we find no merit in the impugned order and accordingly set aside the same. The appeal is allowed.
(Dictated and Pronounced in open court)
(B. RAVICHANDRAN) (D.N. PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
ksr
14-06-2016
DRAFT
Remarks
I
II
III
Date of dictation
14.06.2016
Draft Order - Date of typing
Fair Order Typing
14.06.2016
Date of number and date of dispatch
17.06.2016
2
ST/41069/2013