2024 (1) TMI 584 - AT - Service Tax

CENVAT Credit - exempted service - providing onsite development of software services to the branch office situated abroad - availing Cenvat credit of Service Tax paid on common input services used for providing taxable as well as exempted services - failure to maintain separate accounts for receipt and use of input services used for providing exempted services and taxable output services - liability to pay an amount equal to six per cent of the value of exempted services provided by them, as per Rule 6(3)(i) of the Cenvat Credit Rules, 2004. HELD THAT - The issue has been considered by the Tribunal in the appellant s own case and has set aside the demand M/S. COGNIZANT TECHNOLOGY SOLUTIONS INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF GST CENTRAL EXCISE 2023 (7) TMI 62 - CESTAT CHENNAI holding that There is no allegation in the Show Cause Notice that CTS USA was only a front company for services rendered by CTS India in the USA. This being so no taxable service has been rendered by CTS India in USA with respect to the impugned figures disclosed in their Income Tax Form 3CEB for the Financial Year 2012-13 and 2013-14. This entry was the trigger for the allegations in the show cause notice that culminated in the impugned order. Once no service was rendered by the appellant in USA, which is exigible to tax under the Finance Act 1994, all charges under the said Act against the appellant must fail. Thus, following the decision in the appellant s own case, the demand, interest or penalties cannot sustain and requires to be set aside - the impugned order set aside - appeal allowed.

Summary

Issues:
The issues involved in the judgment are the liability of the appellant to reverse CENVAT credit for allegedly providing exempted services to their overseas branch office and the subsequent demand, interest, and penalties imposed by the authorities.

Issue 1: Liability to Reverse CENVAT Credit
The appellant, a provider of Information Technology Software Services and Business Support Services with a Branch Office in the United States, availed CENVAT Credit of Service Tax paid on various input services. The authorities alleged that the services provided by the appellant to their U.S. Branch were exempted services under the Cenvat Credit Rules, 2004. The appellant was issued a show cause notice demanding a substantial amount under Rule 6(3)(i) of the Cenvat Credit Rules, 2004. The demand was confirmed by the original authority, along with interest and penalties, for the period from July 2012 to March 2015. Subsequently, a similar contravention was noted for the period April 2015 to March 2017, leading to further demands and penalties.

Issue 2: Appeal and Tribunal's Decision
The appellant contended that no services were provided to the overseas branch, challenging the basis of the demand. The Tribunal analyzed the facts, including the Income Tax returns and related documents, to determine the nature of the transactions between the appellant and its U.S. Branch. The Tribunal found that the services in question were actually rendered by the U.S. Branch to its customers and not by the appellant, as alleged. Referring to a previous case involving the same appellant, the Tribunal concluded that the demand could not be sustained. The Tribunal highlighted discrepancies in the impugned order's findings and ruled in favor of the appellant, setting aside the demand, interest, and penalties imposed by the authorities.

Conclusion:
After considering the evidence and following the decision in the appellant's previous case, the Tribunal found that the demand, interest, and penalties imposed on the appellant could not be sustained. Therefore, the impugned order was set aside, and the appeal was allowed with consequential reliefs, if any.