2023 (1) TMI 1141 - AT - Service Tax

SCN for recovery of tax - deemed recipient of service - service rendered in taxable territory owing to operation of rule 3 of Place of Provision of Service Rules, 2012 - HELD THAT - It is trite that show cause notice proposes recovery that claims to be valid in accordance with specific provisions of the taxing statute and it is for the noticee to rely upon factual submissions and judicial decisions in its defence. The test of applicability of such decisions is not on record until raised in reply to notice; proceedings which accept such judgements as precedent may not necessarily have subjected the rigour of case law to contraindicated case law in the absence of rejoinder from tax authorities - Appeal is the first stage for countering the precedent value and it has been placed on record by Learned Authorized Representative that contrary decisions are not only on similar facts but also that certain relevant judgments had not been considered in the decisions cited before the adjudicating authority by the assessee. It would be appropriate for the original authority to take a fresh look at the facts that have not been subjected to detailed scrutiny for proximity to the several decisions cited by both sides - the impugned order is set aside in its entirety - direction to restore adjudication of show cause notice to the original authority with the direction that the judicial decisions and other submissions, if any, be disposed off after detailed consideration. Application disposed off.

Issues Involved:
1. Recovery of Service Tax for the period from 2011-12 to 2014-15.
2. Classification of services provided by subsidiaries.
3. Applicability of the bar of limitation for recovery.
4. Determination of the recipient of services for tax purposes.
5. Reconsideration of judicial precedents and factual submissions.

Detailed Analysis:

1. Recovery of Service Tax for the period from 2011-12 to 2014-15:
The case involves an appeal against the order which disposed of a show cause notice for recovery of tax amounting to Rs. 45,21,49,333 for the period from 2011-12 to 2014-15. The adjudicating authority upheld the demand of Rs. 16,55,12,985 for 2014-15 while dropping the recovery of Rs. 28,66,36,348 for the preceding years on the grounds of limitation.

2. Classification of services provided by subsidiaries:
The appellant provides 'information technology and software services' to overseas customers, which are considered exports with no tax liability. However, subsidiaries located outside India undertake 'on-site' activities that are part of the output service rendered by the appellant. The adjudicating authority classified these activities under 'support services business and commerce,' leading to the tax demand.

3. Applicability of the bar of limitation for recovery:
The Revenue contested the partial dropping of the computed liability by invoking the bar of limitation, arguing that the appellant altered the narration in the books of accounts from 'service received' to 'cost of technical professional' from 2012-13, indicating an intention to mislead. The adjudicating authority's decision was challenged based on the precedent set in the Board of Control for Cricket in India (BCCI) v. Commissioner of Service Tax-II, Mumbai.

4. Determination of the recipient of services for tax purposes:
The adjudicating authority held that the services provided by the subsidiaries were received by the appellant in the taxable territory, making the appellant liable for payment of Service Tax under the reverse charge mechanism (RCM). The authority relied on Rule 3 of the Place of Provision of Service Rules, 2012, and Section 66A of the Finance Act, 1994, to establish the tax liability.

5. Reconsideration of judicial precedents and factual submissions:
The Tribunal noted that the adjudicating authority had not considered certain relevant judicial decisions, such as those in 3i Infotech Limited v. Commissioner of Service Tax, Mumbai-II and Genom Biotech Pvt Ltd v. Commissioner of Central Excise, Nashik. The Tribunal emphasized the need for a fresh look at the facts and judicial decisions cited by both sides.

Conclusion:
The Tribunal set aside the impugned order in its entirety and restored the adjudication of the show cause notice to the original authority. The original authority was directed to reconsider the submissions of the appellant-assessee on the leviability of the tax and the applicability of judicial precedents. The Miscellaneous Applications were disposed of accordingly.

Order Pronounced:
The order was pronounced in the open court on 25/01/2023.

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