2020 (1) TMI 588 - AT - Service Tax

Reverse charge mechanism - reimbursements received towards the services of the manpower and other miscellaneous costs incurred on behalf of the Overseas Group Company - levy of service tax - HELD THAT - Identical issue decided in appellant own case M/s Lucy Electric India Pvt. Ltd., M/s Lucy Electricals Pvt ltd. Vs C.C.E S.T., Vadodara-II 2019 (9) TMI 749 - CESTAT AHMEDABAD where it was held that Since the appellant are not receiving any service, on the contrary, they are providing services to overseas group companies, the provision of Section 66A and Rule made there under is absolutely not applicable, therefore, the demand is also not maintainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Section 66A of Finance Act, 1994 and Rules made thereunder on Reverse Charge Mechanism regarding the taxability of reimbursements received by the appellant from their group companies for services provided in connection with the supply of goods by Indian Companies to their overseas group companies.

Analysis:
The case involved a dispute over the taxability of reimbursements received by the appellant from their group companies for services provided in connection with the supply of goods by Indian Companies to their overseas group companies. The department argued that the reimbursements were taxable under Section 66A of the Finance Act, 1994 and Rules made thereunder on Reverse Charge Mechanism. The appellant, supported by their counsel, argued that a similar issue had been decided in their favor by the Tribunal in a previous case. The Tribunal's previous decision highlighted that the appellant was providing services to overseas group companies, and since the appellant was not receiving any service from abroad, the provisions of Section 66A and related rules were not applicable, making the demand unsustainable.

The Tribunal referred to Section 66A of the Finance Act, 1994 and Rule 2(1)(d)(iv) of the Service Tax Rules 1994 to emphasize that the service tax liability under those provisions applies only when an Indian person receives services from abroad and the service provider does not have an office in India. Since the appellant was providing services to overseas group companies and not receiving any service, the demand based on Section 66A was deemed not applicable. The Tribunal cited previous cases, such as BMW India Pvt. Ltd. and Sumitomo Corporation India P. Ltd., where similar issues were considered and demands were set aside, supporting the appellant's position.

In light of the Tribunal's previous decision in the appellant's own case and the interpretation of Section 66A and related rules, the impugned order was deemed unsustainable. Therefore, the order was set aside, and the appeals were allowed, ruling in favor of the appellant. The Tribunal's decision was based on the understanding that the appellant was providing services to overseas group companies, and as such, the tax liability under Section 66A did not apply, leading to the rejection of the department's demand.