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2022 (10) TMI 878 - AT - Service TaxRefund of CENVAT Credit - Appellant and the service recipient are establishments of a distinct person or not - refund denied on the ground that the services rendered by the Appellant do not meet the criteria under Clause (f) of Rule 6A(1) of the STR inasmuch as it is an overseas branch office of Zaloni Inc. and are merely establishments of distinct persons in accordance with Explanation 3(b) of Section 65B(44) of the Finance Act, 1994 - HELD THAT - The issue involved in the case at hand is no more res integra and has already been decided by the Hon ble Gujarat High Court in the case of LINDE ENGINEERING INDIA PVT. LTD. VERSUS UNION OF INDIA 2020 (8) TMI 181 - GUJARAT HIGH COURT where it was held that the respondents would not have any jurisdiction to invoke the provisions of the Act, 1994 read with Rules, 1994 to bring the services rendered by the petitioner No.1 to its parent Company within the purview of levy of service tax under the provisions of the Act, 1994. The Hon ble Supreme Court in the case of VODAFONE INTERNATIONAL HOLDINGS BV. VERSUS UNION OF INDIA ANR. 2012 (1) TMI 52 - SUPREME COURT has held that a subsidiary and its parent company located in different taxable territories are totally distinct taxpayer (s) or different entities. The Appellant received the charges for their services in convertible foreign exchange. Therefore by respectfully following the ratio as laid by the Hon ble Supreme Court and the judgement of Hon ble Gujarat High Court and considering the fact that the Appellant and the service recipient are two distinct persons, the service provided by the Appellant to Zaloni Inc., USA clearly falls under the category of export of service - Appeal allowed - decided in favor of appellant.
Issues:
1. Refund of Cenvat Credit on input services under Service Tax Rules, 1994. 2. Determination of distinct entities for export of services. 3. Rejection of refund based on relationship between entities. 4. Interpretation of agreements and remittance certificates for service export. Analysis: 1. The case involved a private limited company engaged in exporting services under "Information Technology Software Services" seeking a refund of Cenvat Credit on input services. The Adjudicating Authority rejected the refund, stating that the company's services did not meet the criteria for export under the Service Tax Rules, as it was deemed an overseas branch office of another company. The rejection was based on various grounds, including the remittance of funds between entities and shared management personnel. 2. The Appellant argued that they and the overseas company were separate legal entities, not merely establishments of a distinct person. They emphasized that the determination of entity status should be based on the constitution of the entity, not managerial personnel. They also highlighted that the company was not an extension of the overseas office and disputed the interpretation of remittance certificates in determining service export. 3. The Tribunal referenced a judgment by the Hon'ble Gujarat High Court, which clarified that services provided by a company in India to its parent company abroad should be considered export of services, not establishments of the same company. The Tribunal noted that the Appellant and the service recipient were distinct entities, following the precedent set by the Supreme Court and the Gujarat High Court. Therefore, the service provided by the Appellant was categorized as export of service, leading to the setting aside of the impugned orders and allowing the Appeals filed by the Appellants with consequential relief. 4. The comprehensive analysis considered legal provisions, agreements, remittance certificates, and relevant case laws to determine the distinct entity status for export of services. The judgment highlighted the importance of legal interpretations and precedents in establishing the nature of transactions for service exports, ultimately leading to a favorable decision for the Appellant in obtaining the refund of Cenvat Credit on input services.
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