2014 (1) TMI 311 - AT - Service Tax

Demand of service tax - Reimbursement of invoices paid for the licensed software downloaded of M/s. Microsoft Inc., USA - Demand raised under Business Auxiliary Service - Held that - payment to be made by Dell India Pvt. Ltd. stands paid by group concern based in USA and the said amount stands reimbursed by the appellant. There is no evidence that while routing the payment, the group concern in USA has retained any commission/margin for the services said to have been rendered by them. In these circumstances, we, prima facie, are in agreement with the learned advocate that the services rendered by the group concern based in USA to the appellant is not taxable under the head Business Auxiliary Service . In view of the above, there shall be waiver of pre-deposit of the dues as per the impugned order and stay of recovery thereof till the disposal of the appeal - Stay granted.

Summary

Issues:
1. Tax liability on services rendered by a group concern based in the USA to the appellant.
2. Classification of the services under the category of "Business Auxiliary Service" (BAS).
3. Validity of the demand for service tax, interest, and penalties imposed by the Commissioner.
4. Consideration of evidence regarding payment and reimbursement between the parties involved.

Analysis:
1. The primary issue in this case revolves around the tax liability concerning services provided by a group concern in the USA to the appellant. The Commissioner contended that the amount paid by the group concern to Microsoft Inc. and subsequently reimbursed by the appellant constituted payment towards services rendered. However, the appellant argued that it was a mere procurement of software without any service charge involved.

2. The classification of the services under the category of "Business Auxiliary Service" (BAS) was crucial for determining the tax liability. The Commissioner upheld the classification, leading to the demand for service tax, interest, and penalties. The appellant, on the other hand, emphasized that no service charge was paid to the group concern in the USA, thereby disputing the applicability of BAS.

3. The validity of the demand for service tax, interest, and penalties imposed by the Commissioner was challenged by the appellant. The Commissioner's decision was based on the interpretation of the payment and reimbursement process between the parties. The appellant sought relief from the tax liability based on the absence of any service charge component in the transactions.

4. The consideration of evidence regarding the payment and reimbursement dynamics between the parties played a crucial role in the tribunal's decision. Upon reviewing the submissions and records from both sides, the tribunal found that the group concern in the USA did not retain any commission or margin for the services provided. Consequently, the tribunal agreed with the appellant's stance that the services rendered were not taxable under the category of "Business Auxiliary Service."

This comprehensive analysis of the judgment highlights the key issues, arguments presented by the parties, the tribunal's evaluation of the evidence, and the ultimate decision in favor of the appellant regarding the waiver of pre-deposit and stay of recovery pending appeal disposal.