2016 (12) TMI 165 - AT - Service Tax

Levy of service tax - purchase commission, sales commission, insurance premium of goods, Legal fees to legal consultant s/ advocates for attending company s matter in foreign country, Professional charges, Service Charges for services performed outside India, advertisement expenses displayed in foreign country, Registration consultancy and registration of products in foreign country, Rent on immovable property etc. - Held that - though the Section 64 envisages that the provisions of service tax extends to the whole of India. However in the instant case looking to the above facts it has to be seen as to what the provisions prescribes in case where the outside service providers has though rendered the services outside India but the services has been rendered to the person located in India and bills has been raised to such Indian entity who made payment of such services in foreign exchange. Section 66A of the Finance Act provides charge of service tax on services, in case of services provided by a person who has fixed establishment or permanent residence outside India to a person who has place of business, fixed establishment, permanent address or usual place of residence, in India. In such case taxable service shall be treated as having been rendered by the Service recipient. Further we find that Rule 3 of Taxation of Services (Provided from Outside India and received in India) Rules, 2006 deals with the situation involved in present case i.e Taxable services provided from outside India and received in India. Prima facie it seems that the case in hand is covered by the provisions of Section 66A and Rule 3 supra. However we find that the order passed by the refund sanctioning authority as well as first appellate authority have not verified the vital facts as above. We are of the prima facie view that in case the service received by the person situated in India from the persons situated outside India would be liable for tax. In the present case the goods were cleared from a foreign country to another foreign country but the services related to such transaction was received by the Appellant who has permanent place of business in India and in whose names the bills were raised and who made the payment in foreign exchange. It is identical to case where the goods are exported outside India but the services related to such exports are availed from the overseas service provider such as commission agent etc.. In all such cases the service recipient in India i.e Exporter is liable to service tax. However all these aspects have to be gone into factually. To ascertain the status of the Appellant as the service recipient, it is necessary to verify the bills and invoices raised by the service providers, payment transaction therefore, treatment of the payment transaction in the books of accounts of the Appellant. Principles of unjust enrichment - Held that - it is observed from the finding of the original authority that he has not verified the books of accounts of the Appellant and relied upon the submission made by the appellant in this regard and chartered accountant s certification. It is incumbent on the adjudicating authority to verify from the books of accounts to ascertain the fact whether the incidence of service tax paid by the appellant has not been passed on or otherwise. Hence the aspect of the unjust enrichment also needs careful reconsideration. In view of our above observation and findings we thus remand the matter to the original authority to verify the above facts and decide the eligibility of the Appellant for refund. Appeal disposed off by way of remand.

Summary

Issues:
Refund claim of service tax paid on charges for services rendered outside India.

Detailed Analysis:
The appeal was filed against the Order-in-Appeal setting aside the Refund Order passed by the Assistant Commissioner. The Appellant, engaged in marketing agrochemicals generics overseas, paid service tax on charges for services from 2007 to 2012 and filed a refund claim in 2013. The Appellate Commissioner held that services received were for the business in India, falling under Taxation of Services Rules 2006. The Appellant argued that services were consumed outside India, citing legal precedents and circulars. The revenue contended that as service recipient, the Appellant was liable for service tax, referring to various judgments.

The Tribunal found that services were received from entities outside India for goods sold outside India. The Appellant coordinated activities through their China office and paid service providers in foreign exchange. The Appellate Commissioner sought clarification on service providers, recipients, and payments, which the Appellant explained. Despite the service tax provisions extending to the whole of India, the Tribunal noted that services rendered outside India but to a person in India are taxable under Section 66A. Rule 3 of Taxation of Services Rules 2006 applies to taxable services provided from outside India and received in India. The Tribunal remanded the matter to verify facts, including unjust enrichment, and determine the Appellant's eligibility for a refund.

In conclusion, the Tribunal remanded the case to the original adjudicating authority for further verification and decision on the refund eligibility, emphasizing the need to examine invoices, payment transactions, and books of accounts to ascertain the service recipient status and unjust enrichment. The appeal was disposed of by way of remand, allowing for a thorough review of the facts and legal implications before making a final decision.