2013 (10) TMI 299 - AT - Service Tax

Provision of services to self - BAS - Export of services without receiving foreign exchange - Waiver of pre deposit - Business Auxiallry Service - Held that - There is a serious error in the process of reasoning of the adjudication authority. If the corporate veil of the petitioner is lifted (assuming this process to be legitimate) and the petitioner is considered as the alter ego of the overseas companies (RIM, Canada and RIM, Singapore), there would in such an event and on such inferential process occur no provision of service to another (as it would amount to a service to self); and thus outside the ambit of the taxable service. In so far as the second category is concerned, i.e., during the period June 2009 to February 2010, representing tax liability of ₹ 6,45,65,653/-, as receipts for the service provided during this period were in convertible foreign exchange, prima facie, the issue is covered in favour of the petitioner by the Larger Bench decision in Paul Merchant Ltd. Vs. CCE, Chandigarh reported in 2012 (12) TMI 424 - CESTAT, DELHI (LB) . In so far as payment of interest for delayed payment of Service Tax, amounting to ₹ 8,05,774/- is concerned, the amounts were received by the petitioner as an associated enterprise were entered into books of accounts of the petitioner prior to 10.05.2008, the date with effect from which the provisions of Rule 6 of the Service Tax Rules, 1994 were amended in conformity with the amended provisions of Section 67 (4) (c) of the Finance Act, 1994. In Sify Technologies Ltd. Vs. LTU, Chennai reported in 2012 (5) TMI 376 - CESTAT, CHENNAI , an interim order of waiver of pre-deposit was granted - stay granted.

Summary

Issues:
Waiver of pre-deposit and stay of further proceedings sought based on an adjudication order confirming service tax liability, disallowance of CENVAT credit, and interest payment for delayed service tax.

Analysis:
1. The adjudication order confirmed a significant service tax liability under 'Business Auxiliary Service' (BAS) for two periods, one involving service provided to overseas companies in Indian currency and the other in convertible foreign exchange. The petitioner argued that pre-2007 amendments, service to overseas recipients without payment in foreign exchange constituted export of taxable service. The authority disagreed, considering the petitioner a subsidiary of overseas companies, not a distinct entity.

2. The Tribunal found a serious error in the authority's reasoning, suggesting that if the petitioner is deemed an alter ego of overseas companies, no taxable service provision occurs. The issue for the later period, where services were paid in foreign exchange, was deemed favorable to the petitioner based on a precedent case.

3. The disallowance of CENVAT credit was deemed unsustainable, citing a Tribunal decision supporting the petitioner's position. The Tribunal also found the interest payment for delayed service tax to be prima facie acceptable, as the entries in the petitioner's accounts were made before the relevant rule amendment date.

4. Relying on precedents and legal interpretations, the Tribunal concluded a strong prima facie case in favor of the petitioner. Consequently, the waiver of pre-deposit and stay of proceedings were granted, disposing of the stay application effectively.

This detailed analysis of the judgment highlights the legal arguments, interpretations, and precedents considered by the Tribunal in granting the relief sought by the petitioner.