2014 (8) TMI 513 - AT - Service Tax

Services provided to office / unit located abroad - same entity - Company in Japan deputed certain employees to Delhi office and their salary was paid abroad in Japan but shown in the profit and loss account prepared for Delhi unit - appellant submits that for levying Service Tax there should be two different legal entities involved one providing service to the other - Held that - Delhi office and the corporate office located at Japan are two offices of the same company. In such a situation, prima facie there cannot be any service by corporate office in Japan to Delhi office. Prima facie the demand is not maintainable. Therefore, there shall be waiver of dues for admission of appeal and stay on collection of dues arising from the impugned order during the pendency of the appeal - Stay granted.

Summary

Issues:
1. Whether the Delhi office should pay service tax under Section 66A of the Finance Act, 1994 as a recipient of services from the head office in Japan.

Analysis:
The case involved a project office of a Japanese corporation in India, where certain employees were deputed from Japan, and their salaries were paid abroad but reflected in the profit and loss account of the Delhi unit. The Revenue contended that the Delhi office received services from the head office in Japan and should pay service tax under Section 66A of the Finance Act, 1994.

The appellant argued that for service tax to apply, there must be two different legal entities involved, providing services to each other. They claimed that since the Delhi branch and the corporate office in Japan were part of the same company, with the company's employees working in Delhi, no separate service existed.

In response, the Revenue argued that the two entities were separate, evidenced by separate balance sheets, necessitating the payment of service tax. After considering the arguments, the Tribunal found prima facie that the Delhi office and the corporate office in Japan were two offices of the same company. Consequently, they concluded that there was no service by the corporate office in Japan to the Delhi office. As a result, the demand for service tax was deemed not maintainable, leading to a waiver of dues for admission of appeal and a stay on the collection of dues pending the appeal process.