2008 (11) TMI 104 - AT - Service Tax

Services rendered and invoice issued from, and payment received by appellant s office in abroad - denial of credit on the input-services used in connection with the said output services - credit denied on the ground that the invoices issued was addressed to the Dubai office and that payments were also made from Dubai since out-put services have been indeed rendered in India, input-services have also emanated in India and used for rendering further services in India, credit not deniable

Summary

Issues:
- Dispute over service tax credit on input services used for output services rendered in India by a multinational company.
- Denial of service tax credit by the Commissioner based on the location of invoicing and payments.
- Interpretation of whether the services rendered are offshore services or not.

Analysis:
The case involved an appeal against the Commissioner's Order denying service tax credit to a multinational company for input services received from an Indian company. The appellant, a multinational company with a liaison office in India, had rendered services as a Consulting Engineer to a project in India. They received input services from an Indian company and claimed service tax credit on the same. The Commissioner denied the credit stating that the invoices were addressed to the appellant's Dubai office and payments were made from Dubai, implying offshore services.

The appellant argued that their employees visited India to render services, paid service tax for the output services in India, and received input services in India for further services to an Indian project. The Department reiterated the Commissioner's findings, highlighting that the appellant was not permitted to undertake commercial activities or make payments in India. After considering the submissions and records, the Tribunal found that both output and input services were rendered and used in India, with service tax paid for the output services. The Tribunal deemed the Commissioner's reasoning for denying the credit invalid and improper.

Ultimately, the Tribunal set aside the Commissioner's order and allowed the appeal, providing consequential relief to the appellant. The judgment clarified that the denial of credit on input services used for output services in India was not legally justified, emphasizing the location of service delivery and usage as determinants for service tax credit eligibility.