2015 (8) TMI 1135 - AT - Service Tax

Waiver of pre deposit - Manpower recruitment or supply agency service - Reverse charge of mechanism - Held that - Payments made to local vendors for purchase of foreign currency to facilitate foreign stay of petitioner s employees abroad, on which the tax demand of ₹ 8,765/- is assessed is misconceived as purchase of foreign currency is neither a service nor a taxable service defined anywhere, in the provisions of the Act. Demand of ₹ 25,442/- is attributed as the tax liability on reverse charge mechanism for remittances made for training of petitioner s employees at foreign locations. It is not clear how services provided and consumed outside the Indian territory are taxable under the provisions of Act. In any event since the tax under the provisions of chapter V of the Finance Act, 1994 is a consumption and destination based tax and the levy of tax is confined to services consumed or provided within the Indian territory, we prima facie see no basis for this aspect of the levy. Regarding remaining demand, assessee produced some of the original challans only to the extent of ₹ 1,18,75,607/-, the balance due is ₹ 41,21,153/-. Since we find that demand to the extent of ₹ 34,207/- is attributable to service tax assessed on non taxable services, the balance liability of the petitioner works out to ₹ 40.87 lakhs. - Partial stay granted.

Summary

Issues:
1. Assessment of service tax liability under reverse charge mechanism for various taxable services provided by overseas corporate entities.
2. Tax liability on foreign currency purchase, management consultancy services, and commercial coaching/training.
3. Tax liability on remittances made for training of employees at foreign locations.
4. Verification of foreign exchange expenditure towards technical services and the balance due.

Analysis:
1. The Tribunal examined the confirmed service tax liability of the petitioner, primarily focusing on the tax liability under the reverse charge mechanism for receiving taxable services from overseas corporate entities. The Tribunal noted that a significant portion of the demand was attributed to manpower recruitment services, which the petitioner's counsel argued against, citing precedents from the Tribunal. Additionally, the demand for other taxable services like management consultancy and commercial coaching/training was questioned, especially concerning the purchase of foreign currency for employees' foreign stays. The Tribunal found the tax demand on such services unsustainable as they were not clearly defined as taxable services under the provisions of the Act.

2. The Adjudicating Authority's assessment of service tax on foreign exchange expenditure for technical services was scrutinized by the Tribunal. The Authority had verified the documents and original challans, leading to the conclusion that the petitioner's balance liability amounted to &8377; 40.87 lakhs after deducting the amount attributed to non-taxable services. The Tribunal highlighted discrepancies in the verification process and clarified the final liability of the petitioner based on the evidence presented.

3. Considering the prima facie analysis of the case, the Tribunal granted a waiver of pre-deposit and stayed further proceedings for the realization of the adjudicated liability. The petitioner was directed to remit the specified amount within a stipulated timeframe, failing which the stay would be dissolved, and the appeal dismissed for non-compliance. The Tribunal's decision to grant a conditional stay was contingent upon the petitioner's timely remittance and compliance with the set conditions, emphasizing the importance of meeting the financial obligations to sustain the stay order.

In conclusion, the judgment delved into the intricate details of the service tax liabilities imposed on the petitioner, dissecting each component and assessing its validity under the relevant legal framework. The Tribunal's meticulous analysis, reference to precedents, and conditional grant of stay underscored the nuanced approach taken to address the complex issues raised in the case.