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TMI Blog2020 (7) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... n of services rendered from outside India by the legal fiction of deeming the recipient as provider cannot be founded on money transaction. The scheme of taxation of services in Finance Act, 1994 does not envisage transfer of money to be a service as evidence of such rendering. The taxation of services procured from abroad, if such was the legislative intent, would have been a simple enactment without the need of either the deeming fiction or the elaborate Rules for determination of the destination of service. It is trite to assert that the compelling reason for taxation of services rendered from abroad in the hands of the recipient was two-fold: that businesses in India should not be permitted to indulge in arbitrage owing to escapement from tax on services in which the provider is beyond jurisdiction and that the chain of value-added is not broken. Hence, the receipt of services in India for furtherance of business and commerce are co-terminus parameters for taxation. The convenience of classification as business auxiliary service , to bring the activities within the residual grouping of rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 2,30,37,688/- under section 73 of Finance Act, 1994, along with applicable interest under section 75 of Finance Act, 1994, and penalty of like amount imposed under section 78 of Finance Act, 1994 vide order-in-original no. 53/STC- I/SKS/14-15 dated 23rd September 2014 of Commissioner of Service Tax, Mumbai-I. Proceedings had been initiated on five counts for recovery of ₹ 79,28,91,610/-, of which demand of ₹ 74,43,16,110/- pertaining to erroneous reporting of foreign currency payment in the notes to accounts for financial year 2008-09 was dropped in entirety and the demand of ₹ 4,16,47,020/-, pertaining to payment in foreign currency to agents outside the country towards port charges, was dropped to the extent of ₹ 2,53,76,310/-. Thus the dispute is limited to confirmation of ₹ 5,44,531/-, being the reimbursement to out chartering agents, ₹ 1,62,70,710/-, being payment to agents for handling port charges outside India, ₹ 16,273/- towards the reimbursement of deputation expenditure, ₹ 11,84,500/- as sales promotion expenditure, ₹ 4,30,648/- as expenditure on maintenance and repair and ₹ 7,20,126/- towards expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed at respective ports for the handling of the vessels; in addition to payment being made to these agents for services rendered to the appellant outside the country, the charges levied by the host ports are also routed through these agents. It is the claim of the appellant that, on the direction of the adjudicating authority, they had segregated the agency fees and port charges remitted during the disputed period as ₹1,21,99,369/- and ₹13,36,71,072/- respectively which was not taken into consideration in the impugned order. On the issue of inclusion of reimbursable expenses, transmitted to their agents outside the country for discharge of charges levied by port authorities there, there is no evidence of any portion of such amount having been retained by the agents. The decision of the Hon ble Supreme Court in re Intercontinental Consultants and Technocrats Pvt Ltd was not available to the adjudicating authority, and the ruling therein, that 24. In this hue, the expression such occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute in this score. The question that begs an answer is whether rendering of such service outside India, even if it is for the benefit of the entity in India, amounts to provision of the service in India. The adjudicating authority appears to have crystallised the tax liability on the sole fact of remittance of foreign currency to an agent outside the country and, inferring that such transmission is consideration, has presumed existence of a taxable service without subjecting the impugned activity to the test of conformity with section 65 (105) of Finance Act, 1994, the scheme of tax prevailing during the period of dispute. It would also appear that there has been a presumption that the concatenation of commission in accounting entries and description of the correspondent outside the country as agent suffices to label the activity as that of commission agency without considering the commercial understanding of such. The peculiar characteristic of invisibility, and intangibility of the taxable event compounded by the near impossibility of segregating the taxable element in a bundled transaction, mandates rigorous rules of engagement to comply with constitutional requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the receipt of services in India for furtherance of business and commerce are co-terminus parameters for taxation. The convenience of classification as business auxiliary service , to bring the activities within the residual grouping of rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, merely from commission having been paid, does not pass muster in view of competing and more specific descriptions in section 65(105) of Finance Act, 1994. 9. In the field of maritime commerce, the activity of vessel handling in ports is entrusted to steamer agents and of goods to customs brokers ; undoubtedly, these are agents but if legislative intent was to tax them as providers of business auxiliary service , there would be no need to have these separate descriptions in the enumeration of taxable service and it cannot be the case of the tax authorities that these varieties of agencies are peculiar to India. Logically, when such services are provided by agencies outside India these cannot be provided within India and it is for such reason that taxable services described in section 65 (105) (h) and section 65 (105) (i) of Finance Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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