2018 (8) TMI 23 - AT - Service Tax

Reverse charge mechanism - Designing Services from overseas entities - amount remitted to entities outside India - Section 66A of the Finance Act 1994 - C.B.E.C. vide Circular No. 334/1/2007-TRU dated 28/02/2007 - Held that - The findings by the Original Authority were based on C.B.E.C. Circular dated 28/02/2007. Also, Revenue has not presented any ground before the ld. Commissioner (Appeals) as to how the said finding of Original Authority were not sustainable. Ld. Commissioner (Appeals) also did not deal with application of said C.B.E.C. Circular to the facts of the present case and did not give any finding as to how said finding of Original Authority are not sustainable - demand not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Service Tax liability on payments made to entities outside India for Collection and Development of Samples of Footwear & Footwear Components under Reverse Charge Mechanism.

Analysis:
The appeal was against the Order-in-Appeal passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Kanpur. The appellants had a Service Tax registration for payment of Service Tax on GTA & Business Auxiliary Service under Reverse Charge Mechanism. The Revenue contended that the amount paid by the appellants to entities outside India was for receiving 'Designing Services' and not for procurement of tangible goods. A Show Cause Notice was issued to demand Service Tax amounting to ?13,29,106. The appellants argued that the service received by them fell under Fashion Designing Service, which was not taxable under Reverse Charge Mechanism. The Original Authority agreed with the appellant's contention and dropped the proceedings. However, the Revenue appealed before the Commissioner (Appeals), who upheld the demand and penalties. The appellant then approached the Tribunal.

The Tribunal considered the arguments presented by both parties. The appellant relied on a Circular issued by the C.B.E.C. dated 28/02/2007, which clarified the taxability of Design Services. The Original Authority's decision was based on this Circular, and the Revenue did not challenge this before the Commissioner (Appeals). The Tribunal noted that the Commissioner (Appeals) did not address the application of the Circular to the case or provide reasons for rejecting the Original Authority's findings. Consequently, the Tribunal held that the impugned Order-in-Appeal was not sustainable and restored the Order-in-Original dated 21/02/2012, thereby allowing the appeal.

In conclusion, the Tribunal found that the service received by the appellants was Fashion Designing Service, which was not taxable under Reverse Charge Mechanism as per the Circular issued by the C.B.E.C. The Tribunal emphasized the importance of addressing and substantiating grounds for overturning decisions made by lower authorities in appellate proceedings.