9911796707
TMI Blog2021 (11) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the fact of the present case, whether the services provided by the petitioner No.1 located in India which is a taxable territory and the recipient of the service i.e. holding Company of the petitioner No.1 located outside India which is a non- taxable territory, whether both of them would be two establishments of the same Company or not so as to treat them as distinct persons liable for service tax. The services rendered by the petitioner No.1-Company outside the territory of India to its parent Company would have to be considered export of service as per Rule 6A of the Rules, 1994 and Clause (f) of Rule 6A of the Rules, 1994 would not be applicable in the facts of the case as the petitioner No.1, who is the provider of service and its parent Company, who is the recipient of services cannot be said to be merely establishment so as to be distinct persons in accordance with Item (b) explanation 3 of Clause (44) of Section 65B of the Act, 1994 - Exempt services or not - services provided by the appellant to Larson Toubro Electromech LLC (Oman) and Sargent Lundy, USA - HELD THAT:- In the instant case, the appellant is a service provider and is a joint venture compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service tax. The appellant was rendering services to M/s Larsen Toubro Electromech LLC and M/s Sargent Lundy LLC, both located out of India and was not charging the service tax on such provisions of services during 2012-13 to 2014-15, treating the same as export of service. The Revenue alleged in the demand notices that the said two service recipients were other establishments of the assessee and therefore, provision of service to them was not export of service in accordance with item (b) of Explanation 3 of Clause (44) of section 65 B of the Finance Act, 1994 and in terms of rule 6A of the Service Tax Rules, 1994, as inserted w.e.f. 01.07.2012 vide Notification No.36/2012-S.T., dated 20.6.2012. 3. Relying upon clause (44) of section 65 B of Finance Act, 1994 and item (b) of Explanation 3 revenue further alleged that though the related parties of the assessee may be registered as separate entities in their respective countries under their respective Acts, it did not absolve their status of being any other establishments of the assessee . The criteria of being any other establishment has nothing to do with the place of registration, more so, when the law itself envisa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided by the assessee to other establishments of their own group established in a non-taxable territory are exempted services in view of sub-clause (2) of clause (e) of rule 2 of Cenvat Credit Rules, 2004. 7. Revenue relied on the definition of exempted services , and treating the said services as exempted services, invoked rule 6 (3) of the Cenvat Credit Rules, 2004 to demand an amount equal to 6% /7% of the value of exempted services in terms of rule 6 (3) of the Cenvat Credit Rules, 2004 which reads as follows: Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services:- ______ ______ (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow any of the of the following options, as applicable to him, namely: pay an amount equal to six per cent of value of the exempted goods and exempted services, or (w.e.f 1.6.2015 amended vide Nott. 14/2015- CE(NT) as 'pay an amount equal to six per cent of value of the exempted goods and seven per cent of value of the exempted servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44 of Section 65B of the Finance Act, 1994. In the instant case the services by an entity in India are provided to an establishment of their own group in different countries and they are said to be establishment of distinct persons. In light of the above, services provided by the notice to its group companies situated out of India are not export services. 11. Learned Counsel argued that Sargent Lundy LLC (USA) and Larson and Toubro Electromech LLC, are both independent legal entities and do not even qualify to be establishments of the appellant L T Sargent and Lundy Limited. In this regard, the observations of the Commissioner in the above order are incorrect and misplaced. 12. Learned Counsel further pointed out that Commissioner has not placed any evidence on record to prove that Larson Toubro Electromech LLC was set up by Appellant as its establishment. He pointed out that Larson Toubro Electromech LLC (Oman) was incorporated in the year 1976 whereas the appellant was registered in the year 1995. He argued that in view of above facts, the assertion that Larson Toubro Electromech LLC (Oman) is an establishment of the appellant is incorrect. Learned Counsel argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the provision of the service is outside India and as per clause (e) the payment for such service has been received by the provider of service in convertible Foreign Exchange. It emerges that the petitioner is fulfilling all the conditions, however, so far as the clause (f) of Rule 6A of Rules, 1994 is concerned, it provides that the provider of service and recipient of service are not merely establishments of a distinct person in accordance with tem (b) of explanation 3 of clause (44) of Section 65B of the Act. As per clause (44) of Section 658 of the Act. 1994 service means any activity carried out by a person for other for consideration, and includes a declared service. Item (b) of the explanation 3 stipulates that an establishment of a person in taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Therefore, a question arises in the fact of the present case, whether the services provided by the petitioner No.1 located in India which is a taxable territory and the recipient of the service i.e. holding Company of the petitioner No.1 located outside India which is a non- taxable territory, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company within the purview of levy of service tax under the provisions of the Act, 1994. 16. Learned Counsel also asserted that there is no suppression or misdeclaration on their part. Thus, extended period could not have been invoked in this case. 17. Learned Authorised Representative relied on the impugned order. He pointed out that decision of High Court in M/s Linde Engineering India Pvt. Ltd. was passed after the impugned order was passed. 18. In the rejoinder, learned counsel for the appellant pointed out that whether the transaction amounts to export of service or not is the primary issue to be decided. In M/s Linde Engineering India Pvt. Ltd. (supra), the High Court has, in similar circumstances, held in favour of the appellant. He pointed out that all the other arguments taken in his appeal are alternate arguments. He argued that relief needs to be granted as the primary issue has been decided by the High Court after examining the facts. 19. We have considered the rival submissions. 20. We find that facts are not in dispute that L T Sargent Lundy Limited (appellant) were found to be providing services to (1) Larson and Toubro Electromech LLC (2) M/s Sarg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tromech LLC (Oman) and Sargent Lundy, USA are merely other establishments of the appellant company. 25. This issue was examined in similar circumstances by the High Court in M/s Linde Engineering India Pvt. Ltd. The High Court observed as follows: 9. The facts of the case are not in dispute that the petitioner No.1, who is 100% subsidiary of Linde AG, Germany, which is a leading worldwide technology partner for plant engineering and construction, and is inter alia engaged in the provision of consulting engineering and other services to various entities located in India and outside. On the basis of the scrutiny of the records of the petitioner No.1 by Central Excise Revenue Audit (CERA), it was observed by the respondents that the petitioner No.1 was rendering services to other organizations located in different countries out of India and was not charging service tax on such services treating the same as export of services , more particularly, the petitioner No.1 rendered services to its parent Company and other establishments of Linde Group outside India without payment of service tax by wrongly treating the same as 'export of service. 10. Therefore, to consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out (a) by a lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, organising, selling of lottery or facilitating a organising lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998;. (Finance Act 2016) (b) by a foreman of chit fund for conducting or organising a chit in any manner.; Explanation 3. - For the purposes of this Chapter, - (a) an unincorporated association or a body of persons, as the case may be, and a member thereof shall be treated as distinct persons; (b) an establishment of a person in the taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Explanation 4.- A person carrying on a business through a branch or agency or representational office in any territory shall be treated as having an establishment in that territory; (ii) Section 668 of the Act, 1994 reads thus: Charge of service tax on and after Finance Act, 2012.- 66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen percent. on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greed to be provided shall be treated as export of service when,- (a) the provider of service is located in the taxable territory, (b) the recipient of service is located outside India, (c) the service is not a service specified in the section 66D of the Act, (d) the place of provision of the service is outside India, (e) the payment for such service has been received by the provider of service in convertible foreign exchange, and (f) the provider of service and recipient of service are not merely establishments of a distinct person in accordance with item (b) of Explanation 3 of clause (44) of section 65B of the Act (2) Where any service is exported, the Central Government may, by notification, grant rebate of service tax or duty paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification.] (vi) Rule 2(e) as well as Rule 6 of the CENVAT Rules, 2004 reads thus: 2. In these rules, unless the context otherwise requires,- xxx [(e) exempted service means a (1) taxable servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that an establishment of a person in taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Therefore, a question arises in the fact of the present case, whether the services provided by the petitioner No.1 located in India which is a taxable territory and the recipient of the service i.e. holding Company of the petitioner No.1 located outside India which is a non- taxable territory, whether both of them would be two establishments of the same Company or not so as to treat them as distinct persons liable for service tax. If the answer to this question is in affirmative, as interpreted in the impugned show cause notice that providing the services by the petitioner No.1 to its parent Company would be to the establishment of the petitioner and therefore it would be a distinct person. then rendering of service by the petitioner No.1 cannot be treated as Export of Services as per Rule 6A (F) of Rules, 1994 because as per explanation 3(b) to Section 658(44) of the Act, 1994, the petitioner and holding Company are to be treated as distinct person as per the understanding of the respondent No.3, and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Companies Act, 1956 and its holding Company Incorporated at Germany are both distinct persons and therefore, both cannot be treated to be establishments of the same Company distinct artificial jurisdiction person. 26. In the instant case, the appellant is a service provider and is a joint venture company of Larson Toubro Ltd, an Indian conglomerate and Sargent and Lundy LLC (USA). Both Larson Toubro Ltd and Sargent and Lundy LLC (USA) are independent registered companies in India and USA respectively. The service recipient Larson and Toubro Electromech LLC is a company registered in Oman. The said company is formed with L T Hydrocarbon Engineering Limited holding 70% of its share capital and Modern Channels Services LLC holding 30% of its share capital. From the above it is apparent that L T Electromech LLC, Sargent and Lundy LLC (USA) and the appellants M/s L T Sargent and Lundy Limited are each independent companies registered in their respective countries. From the above it is apparent that the appellant and service recipient are similarly placed as the service provider and service recipient in the case of M/s Linde Engineering India Private Limited de ..... 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