2018 (9) TMI 1983 - HC - Service Tax

CENVAT Credit - establishments of the Petition No.1 or not - consulting engineering services rendered outside India by the Petition No.1 to any other subsidiary of Linde AG or holding company - Export of Services - proportionate reversal of Credit under Rule 6A of the STR - it is submitted that action of the respondent in issuing show cause notice is without jurisdiction and contrary to the provisions of Rule 6A of Sales Tax Rules read with Section 65B (44) of the Act - HELD THAT - Issue NOTICE returnable on 27 th September 2018. Meanwhile, there shall be ad-interim relief in terms of paragraph 9 (b) of the petition.

Summary

Issues:
Interpretation of Explanation 3 to Section 65B(44) of the Act regarding 'establishments of the Petitioner No.1' and whether services rendered by the Petitioner No.1 qualify as 'Export of Services' or Exempted Service under Rule 2(e) of the Cenvat Rules.

The judgment delivered by the High Court of Gujarat pertained to a case where a show cause notice was issued to the petitioners by respondent no.3 seeking reasons for the recovery of a substantial amount under Rule 14 of the Cenvat Credit Rules read with the proviso to Sub-section (1) of Section 73 of the Finance Act, 1994. The petitioners contended that the notice was without jurisdiction and contrary to the provisions of Rule 6A of Sales Tax Rules read with Section 65B(44) of the Act. The court, after considering the submissions and the show cause notice, decided to issue a NOTICE returnable on a specified date in the future, granting ad-interim relief to the petitioners until then.

The key legal issues involved in this judgment were the interpretation of Explanation 3 to Section 65B(44) of the Act and whether the services provided by the petitioners qualified as 'Export of Services' or as an Exempted Service under Rule 2(e) of the Cenvat Rules. The court was tasked with determining whether the holding company of the petitioner could be considered as 'establishments of the Petitioner' and if the services rendered outside India to any subsidiary of the holding company would qualify as 'Export of Services' or not. This analysis required a thorough examination of the relevant statutory provisions and rules, specifically Rule 6A of the Service Tax Rules, 1994, and Section 65B(44) of the Act.

The court's decision to issue a NOTICE returnable on a future date indicated that further proceedings would take place to delve deeper into the legal complexities surrounding the interpretation of the statutory provisions and the show cause notice. The grant of ad-interim relief to the petitioners until the specified date signified a temporary respite from the immediate enforcement of the recovery sought by the respondent. The case highlighted the importance of a detailed analysis of the legal framework governing the taxation of services and the need for a comprehensive understanding of the provisions to determine the applicability of tax liabilities in such situations.