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TMI Blog2018 (9) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... l Property Services" from their associated companies located outside India. Appellants have to pay the service tax leviable in respect of these services, on reverse charge basis. They pay service tax on the value of the services as soon as it is credited in their book of accounts. It was observed that due to fluctuation in the exchange rate, there was variation in the value posted in Appellant's books of accounts and actual amounts remitted to the service providers. Thus show cause notices were issued to the Appellants, demanding the service tax short paid by them on account of exchange rate variation. These show cause notices were adjudicated by the jurisdictional officer, confirming the demands of service tax along with interest. Penalties under Section 76, 77 & 78 have also been imposed by the jurisdictional Additional Commissioner. On appeal Commissioner (Appeal) upheld the order of Additional Commissioner to the extent of demand of differential Service Tax and dropped the penalties imposed on the appellants. Against the order of Commissioner (Appeal) confirming the demand with interest Appellants have filed these three Appeals. 3.0 arguing on behalf of Appellant, Shri Mehul J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dev & Construction Co Ltd [2016 (43) STR 132 (T-Mum)] and Garware Poyester Ltd [2017 (5) GSTL 274 9T-Mum)] it has been held that as per rule 7 of the valuation rules, for the purpose of discharge of Service Tax for the services provided from outside India, the value is equal to actual consideration charged for services provided or to be provided. viii. Since the amount which is required to be paid by them as service tax on reverse charge basis is available tro the as CENVAT Credit the issue is totally revenue neutral. Thus in view of the decision of Apex Court in case of Coca-Cola India Pvt Ltd [2007 (213) ELT 490 (SC) demand should not have been raised. ix. Demand upto 2011-12 i.e. of Rs. 35,49,822/- is time barred as the show cause notice has been received on 1st January 2012, and extended period is not invokable if there was no intention to evade payment of tax. Commissioner (Appeal) has himself in para 10 of his order held that there was no intention to evade payment of tax abnd has dropped the penalty imposed under section 78. They rely on the decision of the Apex Court in case of Continental Foundation Jt Venture [2007 (216) ELT 177 (SC)] 4.0 Arguing for the revenue Shri D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than for the purpose of use in any business or commerce, the provisions of this subsection shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section. Explanation 1.- A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2.-Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted. 67. (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,- (i) in a case where the provision of serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent for the period commencing on and from the 16th day of July, 1997 and ending with the 16th day of October, 1998; or ii. in relation to services provided by goods transport operator, every person who pays or is liable to pay the freight either himself or through his agent for the transportation of goods by road in a goods carriage for the period commencing on and from the 16th day of November, 1997 and ending with the 2nd day of June, 1998, shall be deemed to be a person liable to pay service tax, for such services provided to him, to the credit of the Central Government. (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Govt. in the Official Gazette, the service tax thereon shall paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. 7.2 Rule 6(1) of the Service Tax Rules, 1994 as it existed at the relevant time is reproduced below: 6. Payment of service tax (1) The service tax shall be paid to the credit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign Exchange Rates". "Initial Recognition 8. A foreign currency transaction is a transaction which is denominated in or requires settlement in a foreign currency, including transactions arising when an enterprise either: (a) buys or sells goods or services whose price is denominated in a foreign currency; (b) borrows or lends funds when the amounts payable or receivable are denominated in a foreign currency; (c) becomes a party to an unperformed forward exchange contract; or (d) otherwise acquires or disposes of assets, or incurs or settles liabilities, denominated in a foreign currency. 9. A foreign currency transaction should be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. 10. For practical reasons, a rate that approximates the actual rate at the date of the transaction is often used, for example, an average rate for a week or a month might be used for all transactions in each foreign currency occurring during that period. However, if exchange rates fluctuate significantly, the use of the average rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of actual provision of service if it was determinable; iii. the date of issuance of invoice by the service provider in respect of the service provided. Thus the point of determination of value for service provided was sought to be kept closest to the date of provisioning of service. However to facilitate the payment of Service Tax being a new levy, it was provided that tax should be deposited by the service provider upon the receipt of payment from the service recipient, and if the entire payment against the invoice, was not received by the service provider in one go in one tax period, he was allowed to pay service tax only to the extent of payment received during that tax period. 10.1 In case of payment of service tax on reverse charge basis by the service recipient, the tax was required to be paid by him on the services received on the taxable value determined as per the invoice raised by the service provider. He was not receiver of the payment against the service but was required to make the payment of service tax in respect of the taxable services received. However the tax was to be paid on the value of taxable service received as determined by the service provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, service tax is required to be paid after receipt of payment or crediting/debiting of the amount in the books of accounts, whichever is earlier. However, this provision is restricted to transaction between associated enterprises. This provision shall also apply to service tax payable under reverse charge method (Section 66A) as taxable services received from associated enterprises. For this purpose section 67 and rule 6(1) are being amended. 6.4 The term 'associated enterprise' has the same meaning as assigned to it in section 92A of the Income Tax Act, 1961. It is a relative concept i.e. an enterprise is an associated enterprise when it is viewed in relation to other enterprises. This concept is used in the Income Tax Act for applying transfer pricing provisions. An enterprise which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise is considered as associated enterprise. It also covers an enterprise in respect of which one or more persons who participate, directly or indirectly, or through one or more intermediaries, in the management or control or capital of the other enterprise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided. Explanation- For the purposes of this section, "rate of exchange" means the rate of exchange referred to in the explanation to section 14 of the Customs Act, 1962." 11.2 Thus by insertion of the said section, intention of legislature for laying down the date for determination of taxable value and tax incidence, on the date of providing the service or when the service has been agreed to be provided has been made crystal clear. In a way the determination of taxable value and tax incidence has been totally delinked from the date of payment of tax. 12.0 During the course of arguments learned Chartered accountant has relied upon number of decisions in his favour. We have no quarrel with any of the prepositions laid down by the said decisions. But we will observe that none of this decision has dealt with the subject in dispute and the said decisions can be clearly distinguished from the facts in hand. Since by analysis of la ..... X X X X Extracts X X X X X X X X Extracts X X X X
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