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TMI Blog2019 (4) TMI 1352X X X X Extracts X X X X X X X X Extracts X X X X ..... ically or imported for carrying on of business or commerce is taxable; to the extent of taxability of output or output service, the tax liability, borne or paid, as the case may be, is adjusted through CENVAT Credit Rules, 2004 and, to the extent that the output or output service is exported, refund under CENVAT Credit Rules, 2004 is an inalienable entitlement. In the circumstances of the present dispute, such refund is undeniable even if the legal fiction of recipient being the provider burdens the appellant with tax. Revenue neutrality - HELD THAT:- Procurement of services for use in business or commerce outside India is, unlike the claim of neutrality in other situations to evince lack of motive for evasion of tax, is revenue neutrality, unalloyed and unadulterated. Here, it is not mere off-set. Here, it is not refund of tax whose incidence was borne. Here it is tax that has to be refunded to the person who paid the tax. The payment made to service providers outside the country does not qualify for being subject to tax under section 66A of Finance Act, 1994 - Appeal allowed - decided in favor of appellant. - SERVICE TAX APPEAL NO: 87419 of 2014 - A/85762/2019 - Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 11,84,740 respectively. The impugned order, while dropping demand of ₹ 2,08,37,780, confirmed an amount of ₹ 3,13,81,416 under section 73 of Finance Act, 1994, along with interest thereon under section 75 of Finance Act, 1994, and imposed penalties under section 76, section 77 and section 78 of Finance Act, 1994. Aggrieved by the order, appellant is before us. 6. Learned Chartered Accountant, appearing for the appellant, informed that the demand that was confirmed pertains to rendering of business auxiliary service , in the transaction with M/s Technion Communications Corp, for liability of ₹ 3,01,57,011 and to ₹ 12,24,405 in relation to support services business and commerce on the charges levied by co-location companies and on the charges for renting of server. 7. Learned Chartered Accountant contends that, in the back-to-back agreement of the appellant with M/s Monster Inc and M/s Technion Communication Corporation, the rendering of services to the former, though it be export, has already been assessed and the subjecting of an input service used in rendering of service that was already assessed to tax, even if it be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the definition in section 65(19) of Finance Act, 1994. Reliance is placed on the decision of the Tribunal in United Telecom Ltd v. Commissioner of Central Excise, Hyderabad [2011 (21) STR 234 (Tri-Bang)] and in Sharma Travels v. Commissioner of Central Excise, Jaipur-I [2017 (52) STR 272 (Tri-Del)]. It is contended that, as per the agreement entered into on 1st November 2006 after terminating the earlier outsourcing agreement, the obligation of M/s Technion Communications Corporation was limited to providing the infrastructural support facilities with the dedicated employees transferred to the appellant. 8. It is contended that the co-location charges are more akin to renting of immovable property and, therefore, not covered by the tax on support services of business or commerce and that the server charges are essentially for right to use in a manner similar to the dispute resolved by Hon ble High Court of Karnataka in Antrix Corporation Ltd v. Assistant Commissioner of Commercial Taxes [2010-TIOL-515-HC-KAR]. It is also claimed that the demand is revenue neutral as the appellant is entitled to CENVAT credit. Contending that the extended period has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. In this context, we may be stating the obvious to observe that every outward remittances is not necessarily a consideration for procurement of services. There can be no dispute that, if the payments had been transmitted by the appellant for any one or more of the services enumerated in section 65(105) of Finance Act, 1994 and the services have indeed been received by the appellant in India in accordance with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, service tax liability will, under section 66A of Finance Act, 1994 and subject to the applicable Explanation in that provision, devolve on the appellant. The issue in this dispute is whether these two limbs essential for burdening the appellant, as recipient of service, are in evidence. Appellant claims that the decision of the Tribunal in re Genom Biotech Pvt Ltd would have it otherwise. 12. Before examining the other claims of the appellant relating to classification of the activities under either business auxiliary services or support services of business of commerce and the plea of limitation, the ground that tax liability on reverse charge does not de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty with consideration as quid pro quo. Understandably, the perceptible absence of a provider, owing to being beyond the pale of the taxable territory, rendered any shift of the burden for liability of tax to be inconsistent and illogical. Accordingly, section 66A of Finance Act, 1994, infused with the legal fiction of the recipient as the deemed provider and sans recourse to inclusion in the definition of person liable for paying tax , was the alternate charging section. With the impossibility of detecting the arrival of the service in India inherent in such transactions, the charging provision would have remained unenforceable. As an indirect tax that is manifest in consumption at the destination, the superfluity of such detection in domestic transaction could not hold for cross-border transactions and the gap was filled by notifying the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 as the guide rail for such determination. The scope and limitation of the pertinent Rules would is of more relevance than the charging section in Finance Act, 1994. This is particularly so as the decision of the Tribunal in re Genom Biotech Pvt Ltd has been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the extent of the legislative intent to subject procurement of services from abroad is confirmed therein. 17. From our observations above, there can be no doubt that services procured domestically or imported for carrying on of business or commerce is taxable; to the extent of taxability of output or output service, the tax liability, borne or paid, as the case may be, is adjusted through CENVAT Credit Rules, 2004 and, to the extent that the output or output service is exported, refund under CENVAT Credit Rules, 2004 is an inalienable entitlement. In the circumstances of the present dispute, such refund is undeniable even if the legal fiction of recipient being the provider burdens the appellant with tax. Hence, the question of legislative intent as framed above; the answer has been provided by the Tribunal in re Genom Biotech Pvt Ltd. 18. In that dispute, the Tribunal found that the assessee was, in effect, undertaking two activities: that of manufacture and that of sale. Though the first of these was carried out within the taxable territory, the goods, being exported, were being marketed outside the taxable territory. It was held that, as the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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