2011 (5) TMI 546 - AT - Service Tax

Technical Inspection and Certification service - Assessee is providing Inspection Service to their parent company viz. M/s. Underwriters Laboratories Inc. Chicago, USA(UL) - Held that - Initial order for undertaking Technical Inspection and issue of certificate is placed on UL, initial verification and study of the product is done by the US company and the data is sent to the appellant who verify whether it conforms to the standards and thereafter undertake the periodical inspection of process and send the report to UL, on the basis of which UL takes a decision as to whether the certification should continue or not and further the technical report is also prepared by the appellant and sent to UL. The above analysis clearly shows that the service in this case is performed by both in India and abroad and all the payments are made to UL in US who in turn remunerate the Indian subsidiary, the appellant - Thus when a service is performed partly in India and partly outside no tax is leviable as relying on CST Vs. B.A. Research India Ltd. (2010 (5) TMI 89 - CESTAT, AHMEDABAD) and also the Export of Service Rules - Decided in favour of assessee.

Summary

Issues:
Service Tax demand on different services provided by the appellant, classification of services under "Technical Inspection and Certification service," export of services, applicability of penalties under Section 75, 76, 77, and 78 of the Finance Act, 1994.

Analysis:
The case involved a subsidiary of a US company engaged in certifying product safety standards. The service tax demand of Rs. 1,89,23,556 was imposed for services provided from October 2006 to September 2008, classified under "Technical Inspection and Certification service." The appellant argued that its activities could also fall under Consulting Engineer Services, Business Auxiliary Services, and Business Support Services, not solely under Technical Inspection and Certification Service. The appellant contended that if the service is partly performed in India and partly abroad, it should be treated as an export of service, citing a Tribunal decision in CST Vs. B A Research India Ltd. The Department maintained that the services provided were indeed Technical Inspection and Certification services.

The Tribunal analyzed the submissions and records, noting that the appellant's services included comparing products with standards, preparing reports, conducting inspections, and issuing safety standard certificates. The Department's show cause notice acknowledged that the services were performed as per the direction of the US company, with activities both in India and abroad. Payments were made to the US company, which then remunerated the Indian subsidiary. The Tribunal found a strong prima facie case in favor of the appellant, considering the service partly performed in India and partly abroad, aligning with the Export of Service Rules and the precedent set in the CST Vs. B.A. Research India Ltd. case.

The Tribunal concluded that the appellant's services were a fit case for a full waiver of pre-deposit and granted a stay against the recovery of all dues during the appeal's pendency. The operative portion of the order was pronounced at the conclusion of the hearing.