2024 (9) TMI 1598 - AT - Service Tax

100% Export Oriented Undertaking - Database Usage Charges - Legal Services - Salary - Reimbursement of Expenditure - Quantification Error - Extended Period of Limitation. Database Usage Charges - main argument of the appellant in this case is that though they have made the provision towards the payment to be made towards the Database Usage charges to the overseas service provider, in view of the prevailing global financial crisis, based on a mutual agreement, the service provider waived the consideration to be paid to them - HELD THAT - In this case, mere submission by the appellant that Data Usage charges have not been paid, would not be sufficient to take it on the face value. It is to be seen as to whether enough evidence has been produced / adduced or not. The documentary evidence brought in by the appellant, clearly proves beyond doubt that the appellant never paid the Data Usage Charges to the overseas service provider. The Department is in error in taking the Service value of USD 2490000 Rs.11,17,88,550 towards the Data Usage charges to confirm the Service Taxdemand of Rs.1,15,14,221. Therefore, the demand to this extent set aside on merits, and the appeal is allowed. Demand of Rs.5,65,983 on account of the Legal Services utilized by the appellants - HELD THAT - The Legal Services have been brought under Service Tax bracket vide Notification No.30/2012 ST dated 20.6.2012 effective from 1.7.2012 , wherein as per Sl No.5 of the Table, the Service Tax in respect of the Services rendered by individual advocate or firm of advocates, the Service Tax is required to be paid by the recipient of service.Thus this service became taxable for the first time with effect from 1.7.2012. Though the Service Tax to be paid on Reverse Charge basis in respect of import of services was already been place with effect from 18.04.2006 in view of Section 66A, the service in question has to be first of all be taxable service per se so as to attract the provisions of Section 66A. In this case since Legal services were not under Service Tax bracket till 1.7.2012, Section 66A provisions cannot be directly applied to demand Service Tax payment. Therefore, the confirmed demand on account of Legal services amounting to Rs.5,65,983, is legally not sustainable and set aside the same. The appeal is allowed to this extent. Demand of Rs.2,14,085 being the Service Tax element towards the outflow of foreign exchange on account of Salary, as has been certified by State Bank of India - HELD THAT - It is found that this would not call of any Service Tax payment. Hence, the confirmed demand of Rs.2,14,085 is set aside and the appeal allowed to this extent. Reimbursement of Expenditure - appellant claims that the foreign exchange outflow is on account of expenses incurred by the overseas parties and the same has been reimbursed to them - HELD THAT - Appellant have submitted the Certificate issued by SBI to this effect. They have also enclosed more than 160 documents like the main invoice, the connected expenses details like hotel bills, travel bills etc., to fortify their arguments. It would not be possible for the Tribunal to go through these documents to come to a conclusion as to whether they are in the nature of reimbursement or not. However, this demand of Rs.4,49,629 set aside. Quantification Error - HELD THAT - As has been seen, non-bifurcation of the demand under the individual heads has resulted in making and confirming the demand for Legal Services and Salaries which did not attract the Service Tax at that point of time. The demand of Rs.4,49,629 in respect of reimbursement is being set aside, on the ground that this was not part of classification mentioned in the Show Cause Notice - In respect of the small confirmed amount of Rs.2784, on the same ground that no specific classification has been brought in, the same is set aside and the appeal is allowed to this extent. Time Limitation - HELD THAT - The Revenue has not brought in any cogent sustainable evidence to effect that the appellant has suppressed any facts with a wilful intent to evade payment of Service Tax on Reverse Charge basis. Therefore, the confirmed demand for the extended period is set aside on the ground of time bar also. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Database Usage Charges
2. Legal Services
3. Salary
4. Reimbursement of Expenditure
5. Quantification Error
6. Extended Period of Limitation

Issue-wise Detailed Analysis:

1. Database Usage Charges:
The appellants contested a demand of Rs.1,15,14,221 for database usage charges. They argued that although they had booked the expenditure in their accounts for FY 2009-10, the amount was never paid due to a mutual agreement with the service provider, Fox Insurance Co. (FICO), amid a financial crisis. Documentary evidence, including emails, letters from FICO, and certificates from auditors and banks, substantiated that the entire invoice amount of USD 2,490,000 was waived and no payment was made. The Tribunal accepted this evidence and set aside the demand on merits.

2. Legal Services:
The appellants disputed a demand of Rs.5,65,983 for legal services. They argued that legal services were brought under the Service Tax bracket only from 1.7.2012, while the period in question was 2009-10 and 2010-11. The Tribunal agreed, noting that legal services were not taxable during the relevant period, and set aside the demand.

3. Salary:
The appellants challenged a demand of Rs.2,14,085 for salary paid to an employee in the USA. They provided an agreement and bank documents to show that the salary does not fall under taxable services as per section 65(105) of the Finance Act, 1994. The Tribunal found no basis for the demand and set it aside.

4. Reimbursement of Expenditure:
The appellants contested a demand of Rs.4,49,629 for reimbursement of marketing expenses incurred by an overseas entity. They provided extensive documentation to support that these were out-of-pocket expenses reimbursed on an actual basis. The Tribunal noted that the Show Cause Notice (SCN) did not specify the nature and classification of these services and set aside the demand.

5. Quantification Error:
The appellants identified a quantification error resulting in a demand of Rs.2,784. The Tribunal agreed that no specific classification was provided in the SCN and set aside the demand.

6. Extended Period of Limitation:
The appellants argued that the demand for the extended period was time-barred, as they had maintained all statutory records and there was no intent to evade tax. The Tribunal found that the appellants were registered and had filed returns, and any service tax payable would be eligible for Cenvat Credit, resulting in a revenue-neutral situation. Citing relevant case law, the Tribunal set aside the entire demand for the extended period on the grounds of time bar.

Summary:
The Tribunal allowed the appeal, setting aside the demands for database usage charges, legal services, salary, reimbursement of expenditure, and quantification error on merits. Additionally, the entire demand for the extended period was set aside due to time bar, as no suppression with intent to evade tax was proven. The appellant is eligible for consequential relief as per law.