2018 (5) TMI 720 - AT - Service Tax

Export of services - certain services carried out for their foreign principals in India - Held that - it is seen from the record that the consideration for such services were received from the foreign principal in foreign exchange - the activities are to be considered as export of services and hence no service tax is liable to be charged for such activities - appeal allowed. Demand of about ₹ 31 lakhs which stand confirmed against the appellant - principles of natural justice - Held that - after the issue of such corrigendum an opportunity stands extended to the appellant to file their further reply. One more personal hearing was also been extended on 11.9.2012 in which the appellant was given full opportunity to rebut the charges - the principles of natural justice stand fully complied with and the technical objections raised by the appellant are rejected. Demand of service tax - commercial training service - real estate agent service - management, maintenance or repair service - Held that - the appellant does not seriously contest on merit the demand - demand upheld. Demand of service tax - Internet telecommunication service - Held that - there is nothing on record from which it can be inferred that the service relating to the audio conferencing was availed through internet. The only document available on record is copy of the invoice dated 7.6.2010 of M/s Verizon Conferencing, Hong Kong. From this it cannot be inferred that the service was rendered through internet - the service cannot be categorised under this head - demand set aside. Penalty set aside. Appeal allowed in part.

Summary

Issues:
1. Service tax demand on marketing and technical support services provided by the appellant.
2. Demand for service tax under reverse charge basis.
3. Classification of services for service tax purposes.
4. Compliance with principles of natural justice in issuing show cause notices.

Analysis:

Issue 1: Service tax demand on marketing and technical support services
The appellant, a subsidiary of a US-based company, was providing marketing and technical support services to a Singapore-based company. The department issued a show cause notice for service tax amounting to ?27,46,76,310. The appellant argued that the services provided were in connection with their foreign principal and were in the form of export of services. Citing relevant case laws, the appellant contended that service tax was not applicable on amounts received from foreign principals. The Tribunal agreed, setting aside the demand of ?23,23,71,599 and ?3,91,23,854 related to these services.

Issue 2: Demand for service tax under reverse charge basis
The appellant contested a demand of ?31,80,857 under reverse charge basis, arguing that the original show cause notice was vague and improved upon later, violating principles of natural justice. The department issued a corrigendum specifying the services after receiving the appellant's reply. The Tribunal found that the principles of natural justice were complied with as the appellant was given an opportunity to respond. The demand was upheld for certain services, and the appeal was partly allowed.

Issue 3: Classification of services for service tax purposes
The Tribunal upheld the demand for commercial training service, real estate agent services, and management, maintenance, or repair service, as the appellant did not contest these and had paid the tax. However, a demand of ?7,63,331 under internet telecommunication service was set aside. The appellant argued that the service was related to audio conferencing and should be classified differently. The Tribunal found insufficient evidence to classify it as an internet service, thus setting aside the demand.

Issue 4: Compliance with principles of natural justice
The Tribunal found that the department's issuance of a corrigendum to the show cause notice did not violate principles of natural justice as the appellant was given an opportunity to respond. The technical objections raised by the appellant were rejected, and the Tribunal upheld the demands for certain services based on merit and compliance with procedural requirements.

In conclusion, the Tribunal set aside certain service tax demands while upholding others based on the nature of services provided, compliance with procedural requirements, and principles of natural justice. The penalty imposed was set aside, and the appeal was partly allowed in favor of the appellant.