2024 (12) TMI 1029 - AT - Service Tax

Liability of service tax - Whether the services in question have been provided by UTS-USA directly to Reliance Infocom amounting to Import of the Services or the services are provided by the appellant inviting its liability to pay service tax? - Extended period of limitation. HELD THAT - The agreement about rendering of impunged services, makes it clear that the Support Services in question are provided by UTS-USA which is located in non taxable territory, to Reliance Infocom Ltd which is located in taxable territory with the clear agreement that later shall be paying the consideration to UTS-USA excluding all taxes applicable as per Indian laws except withholding tax. Thus it stands established that the service provider is UTS-USA and UTS-India is wrongly alleged as the servicer provider to Reliance Infocom Pvt. Recipient in the present case is Reliance Infocom located in taxable territory. Resultantly it was Reliance Infocom who was liable to pay service tax under reverse charge mechanism on the amount in dispute paid during the disputed period to UTS-USA. It is also the admitted fact on record that the Reliance Infocom has discharged the entire service tax liability on the disputed amount. The appellant / UTS-India is, admittedly, a subsidiary of UTS-USA hence cannot be considered as the distinct entity specifically when the service provider is the main company that UTS-USA. The observation are sufficient to hold that appellant is wrongly alleged to be the service provider. The service tax liability confirmed against the appellant is thereof liable to set aside. Extended period of limitation - HELD THAT - The SCN was issued on wrong presumption. The impunged activity is held to be the Import of Service by Reliance Infocom as received from UTS-USA. Hence the demand has wrongly been confirmed against the appellant who is the subsidiary of UTSUSA, the service provider located in non taxable territory. Otherwise also the service tax stands already paid by the service recipient, Reliance Infocom Pvt. Ltd under reverse charge mechanism. This information was already provided to the department. The extended period is wrongly been invoked. Thus the show case notice is held barred by time. The order under challenge is hereby the set aside. Consequent thereto, the appeal stands allowed.

Summary

Issues Involved:
1. Whether the services in question were provided by UTS-USA directly to Reliance Infocom, constituting 'Import of Services', or by the appellant, thereby attracting service tax liability.
2. Whether the extended period of limitation was correctly invoked for issuing the show cause notice.

Issue-wise Analysis:

1. Nature of Service Provision and Tax Liability:

The primary issue was whether the services were provided by UTS-USA directly to Reliance Infocom, which would categorize them as 'Import of Services', or if they were provided by the appellant, UTS-India, thereby incurring service tax liability. The tribunal examined the Master Annual Maintenance Contract dated 25.02.2003, which clearly indicated that UTS-USA, located in a non-taxable territory, agreed to provide support services to Reliance Infocom in India, a taxable territory. The agreement specified that Reliance Infocom would pay UTS-USA, excluding all applicable Indian taxes except withholding tax. This arrangement established that UTS-USA was the service provider, and the services were imported by Reliance Infocom, who was responsible for paying the service tax under the reverse charge mechanism. The tribunal concluded that UTS-India was incorrectly identified as the service provider, and thus, the service tax liability confirmed against the appellant was set aside.

2. Invocation of Extended Period of Limitation:

The tribunal also addressed the issue of whether the extended period of limitation was appropriately invoked. The appellant had filed service tax returns for the relevant period, explicitly disclosing that the services were treated by Reliance Infocom as 'Import of Services', and the tax was paid by the recipient. The appellant had also informed the department through a letter dated 20.06.2007 about the tax being paid by Reliance Infocom. Despite this, the show cause notice alleged that UTS-India had imported the services and failed to pay the service tax, which was incorrect. The tribunal found that the department had all necessary information and that the show cause notice was issued based on incorrect presumptions. There was no willful suppression or evasion of tax by the appellant. Consequently, the tribunal held that the extended period of limitation was wrongly invoked, rendering the show cause notice time-barred.

Conclusion:

The tribunal concluded that the services in question were indeed 'Import of Services' by Reliance Infocom from UTS-USA, and the service tax had already been paid by Reliance Infocom under the reverse charge mechanism. The appellant, UTS-India, was not liable for the service tax, and the extended period of limitation was incorrectly applied. The show cause notice was deemed time-barred, and the order under challenge was set aside, allowing the appeal.