2024 (11) TMI 925 - AT - Service Tax

Liability to pay service tax - services provided to a foreign entity - as argued turnover undertaken within the domestic market was less than the threshold limit, therefore, they were not required to pay any Service Tax - Adjudicating authority dropped part of the demand and confirmed the Service Tax demand along with interest and penalty - HELD THAT - As in case of Business Auxiliary Services / Business Support Services they would fall under the category of 3(1)(iii). As per the provisions under Rule 3(1)(iii)of the Export of Services Rules 2005, so long as the services are provided to an entity situated abroad, the same would be exempted from payment of Excise Duty, provided the consideration is received in convertible foreign exchange. The clarification given by the Board Circular echoes the same view. In the present case, both the facts as to whether the service has been rendered to a foreign entity or not and as to whether the appellant has received the proceeds in convertible foreign exchange or not, are not under dispute. Therefore, we find force in the Appellant s arguments that no Service Tax is required to be paid. Accordingly, we set aside the confirmed demand given the Table A above. Demand in respect of Erection, Commissioning and Installation Services - As observed Appellant s turnover during the period 2008-09 to 2011-12 was much below the threshold limit. Hence no Service Tax is required to be paid by them for the period 2008-09 to 2011-12. In respect of Erection, Commissioning and Installation Services taken up during the period 2012-13, the Appellant is required to pay the Service Tax. It is found from the records that the Appellant has already paid Rs.1,44,381/- along with interest of Rs.18,172/- on 26.08.2013, which is more than the Service Tax payable if the threshold exemption of Rs.10,00,000 is considered for the period 2012-13. Therefore, we hold that the Appellant has already paid Service Tax where it is payable. Accordingly, we set aside the confirmed demand of Rs.2,75,420/- on merits. Invoking extended period of limitation - We find that the Appellant has declared of their foreign exchange earnings in the Balance Sheet. They are also assessed under Service Tax registration and have been filing ST-3 Returns. The Department has not made out any specific case of suppression on the part of the Appellant. Therefore, the confirmed demand in respect of the extended period is set aside on account of time bar also.

Issues Involved:

1. Applicability of Service Tax on services provided to a foreign entity under the Export of Services Rules, 2005.
2. Liability to pay Service Tax on 'Erection, Commissioning and Installation' services based on turnover threshold.
3. Invocation of the extended period for demand due to alleged suppression of facts.

Issue-wise Detailed Analysis:

1. Applicability of Service Tax on Services Provided to a Foreign Entity:

The primary issue revolves around whether the services provided by the Appellant to a foreign entity, specifically M/s. Mitsubishi Boeki Ltd., Japan, are subject to Service Tax under the Export of Services Rules, 2005. The Appellant contends that the services rendered, which involved identifying customers in India for the foreign entity, were paid for in foreign currency. According to Rule 3(2) of the Export of Services Rules, 2005, and supported by Board Circular No.111/5/2009-ST, services provided to a foreign entity are exempt from Service Tax if the payment is received in convertible foreign exchange. The Tribunal found that the Appellant met these conditions, as the services were provided to a foreign entity and payment was received in foreign currency. Therefore, the Tribunal set aside the confirmed demand of Rs.3,12,770/- for these services, acknowledging that no Service Tax was payable.

2. Liability to Pay Service Tax on 'Erection, Commissioning and Installation' Services:

The second issue concerns the Service Tax liability on 'Erection, Commissioning and Installation' services provided within India. The Appellant argued that their turnover for these services was below the threshold limit of Rs.10,00,000 for the periods 2008-09 to 2011-12, thus exempting them from Service Tax. The Tribunal agreed with this position, noting that the Appellant's turnover during these years was indeed below the threshold, and consequently, no Service Tax was payable for these periods. However, for the period 2012-13, the turnover exceeded the threshold, necessitating the payment of Service Tax on the amount exceeding Rs.10,00,000. The Appellant had already paid Rs.1,44,381/- along with interest, which was more than the required Service Tax for that year. Thus, the Tribunal set aside the confirmed demand of Rs.2,75,420/- on these grounds.

3. Invocation of the Extended Period for Demand Due to Alleged Suppression:

The final issue pertains to whether the extended period for demand could be invoked due to alleged suppression of facts by the Appellant. The Appellant maintained that they had declared their foreign exchange earnings in the Balance Sheet and filed regular ST-3 Returns, indicating transparency in their dealings. The Tribunal found no evidence of suppression by the Appellant, as the Department did not make a specific case of suppression. Consequently, the Tribunal set aside the confirmed demand for the extended period on account of time bar, ruling that the invocation of the extended period was unjustified.

Conclusion:

The Tribunal allowed the Appeal, setting aside the confirmed demands based on the merits of the case and the absence of suppression by the Appellant. The Appellant is entitled to consequential relief as per law, and the order was pronounced in the open court on 19.11.2024.

← Previous Next →