2014 (11) TMI 121 - AT - Service Tax

Import of service - inter branch transactions with foreign branch - Demand raised on the ground that appellant had received services from abroad from their own branches and others through their branches - Held that - There is no evidence to show that the services have been received by the appellants. The Commissioner has observed that since the amount has been paid, it has to be presumed that the services have been received. This observation cannot be sustained especially in view of the specific ledger entries which show transfer of funds for payments of salary, bonus, electricity charges, etc. Under these circumstances, in the absence of any specific evidence for receipt of taxable services, it cannot be said that the Revenue has made out a case of offence against the appellant on a prima facie basis. As regards the service tax credit on construction service, the inclusive definition of input services clearly covers service tax paid on construction of factory during the relevant period. That being the position, the credit is prima facie admissible. In view of the above, the appellant has made out a prima facie case for complete waiver. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

Summary

Issues:
1. Demand for service tax on services received from abroad through branches.
2. Eligibility for Cenvat credit of service tax paid on construction service.

Analysis:
1. The appellant was demanded service tax of &8377; 2,11,38,195/- for services received from abroad through their branches. The Tribunal noted that the appellant had paid amounts to their branches for various expenses, but the demand was based on the premise that the foreign offices were not permanent establishments. The Tribunal found no evidence supporting this claim and highlighted that without proof of services being received, the presumption of services based on payments made cannot be sustained. The Commissioner's observation that payment implies service receipt was refuted, emphasizing the lack of specific evidence for taxable services. The Tribunal also considered the definition of permanent establishment and ruled that without concrete proof, the claim that branches should be treated as separate establishments cannot be dismissed. Consequently, the Tribunal held that the Revenue failed to establish a prima facie case against the appellant for service tax demand.

2. Additionally, an amount of &8377; 19,51,207/- was demanded as the appellant was deemed ineligible for Cenvat credit of service tax paid on construction services for their factory building. The Tribunal analyzed the definition of 'input services' and concluded that service tax paid on factory construction during the relevant period fell within this definition, making the credit prima facie admissible. Considering this, the Tribunal found that the appellant had established a prima facie case for complete waiver. Consequently, the requirement of pre-deposit was waived, and a stay against recovery was granted during the appeal process.