9911796707
TMI Blog2024 (5) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... ated February 04, 2009, the services qualify to be export of services in view of the Export of Service Rules as the service is used outside India. The Tribunal has held similarly in the case of CCE ST Vs Glaxo SmithKline Pvt. Ltd. [ 2023 (10) TMI 998 - CESTAT CHANDIGARH] and Arcelor Mittal Stainless India Pvt. Ltd. [ 2023 (8) TMI 107 - CESTAT MUMBAI-LB] . Classification of services - Royalty paid by Baxter India to Baxter Healthcare Inc., USA - classifiable under 'Franchise Services' or under 'Intellectual Property Services'? - HELD THAT:- The activity of the appellants as seen from the Agreement is not in the nature of Management Consultancy Services; though, at some places, the word Advice is used; on going through the terms of the Agreement, it will be clear that this is in the nature of giving or passing on of information rather than giving a management advice. It is found that the appellants are providing various information which is available in India to M/s Baxter, Singapore. The contentions of the appellants are correct. Moreover, as contended by the appellant, classification of service does not matter as long as they are exported. There is no such averment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsportation of Goods Service . On conducting an investigation, it appeared to the Department that the appellants are not discharging service tax and certain reimbursements made to the foreign entities for the services received under Reverse Charge Mechanism. Five show-cause notices were issued which culminated in the issue of the impugned orders. 3. Ms. Priyanka Rathi, assisted by Ms. Shubangi Gupta, learned Counsels for the appellants, submits that there are five issues discussed in the impugned orders. 3.1. Regarding the allegation of non-payment of service tax on services provided by the Appellant to M/s Baxter Singapore and the misclassification thereof, she submits that irrespective of the classification of services, the services qualify as exports as these services were provided to M/s Baxter Singapore which is located outside of India and the consideration for such services was also received in foreign convertible currency; even otherwise, the services provided by the Appellant merit classification under Business Auxiliary Services being in the nature of promotion and marketing services; Service tax is a destination based consumption tax and hence exports cannot be taxed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Such services were classified as 'Intellectual property services by the Appellant; however, the Department has erroneously classified them as 'Franchise Service'; the services are not classifiable as 'franchise service' as there is no grant of representational rights by the franchisor to franchisee, which is compulsorily required to be categorized under franchise services'. She relies on Reckitt Benckiser (India) Pvt. Ltd. v. CCE, 2021 (46) GSTL 41 (Tri. - Chan.). 3.4. Regarding the allegation of non-payment of service taxon networking charges and technical services received by the Appellant, she submits that service tax on services received by the Appellant from overseas entity is not payable prior to April 18, 2006 inasmuch as the relevant charging section for tax on import of service under reverse charge mechanism, i.e., Section 66A of the Act, came into effect only from April 18, 2006. She relies on Indian National Ship Owners Association v. Union of India, 2009 (13) STR 235(Bom.) maintained by the Hon'ble Supreme Court in 2010 (17) S.T.R. J57 (S.C.) and CST Delhi v. Sojitz Corporation, 2022 (65) GSTL 130 (SC). 3.5. Regarding the allegation of non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tested the liability under this category and the demand under Management Consultancy Services . Regarding the demand of service tax on various reimbursements/ payments made by the appellants, learned Authorized Representative submits that the argument of the appellants is not substantiated and has been rightly denied by the Adjudicating Authority. 6. Heard both sides and perused the records of the case. The instant case requires us to consider as to whether: the services provided to Baxter Healthcare Far East Pte. Ltd. (Baxter Singapore), merit classification under the category of Management Consultant's Services or under Business Auxiliary Services . Mark-up on transfer price income, charged by Baxter India from Baxter World Trade Corporation (BWT), qualifies as 'export consideration Royalty paid by Baxter India to Baxter Healthcare Inc., USA is classifiable under the taxable category of 'Franchise Services' or under 'Intellectual Property Services'. the appellants are liable to discharge service tax on networking charges and technical services procured by Baxter India from overseas entities. the appellants are liable to discharge service tax liability on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tities. Though, the services are performed in India, the beneficiary of the services is abroad and the payment for the same is coming to the appellants along with the reimbursed expenses; therefore, in view of the Circular No.111/05/2009-ST dated February 04, 2009, the services qualify to be export of services in view of the Export of Service Rules as the service is used outside India. We find that the Tribunal has held similarly in the case of CCE ST Vs Glaxo SmithKline Pvt. Ltd. (supra) and Arcelor Mittal Stainless India Pvt. Ltd. (supra). 8. Coming to the classification of services rendered by the appellant to M/s Baxter, Singapore, we find that the same are rendered in terms of Agreement dated February 25, 1997; we find that the scope of the services are as follows: 3.1. (a) information on all the applicable and relevant policies of the Government of India from time to time; (b) annual estimates of market development over a five-year period; (c) advice on the relevance and contents of promotional and publicity material addressed at the Indian market, (d) advice and inputs to Baxter Singapore as may be required from time to time on such matters as may be within the technical, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nition of Intellectual Property Service and Franchise Service are defined as under: (i) Section 65(55b): Intellectual property service means: (a) transferring temporarily; or (b) permitting the use or enjoyment of, any intellectual property right; (ii) Section 65(47): franchise means an agreement by which the franchisee is granted representational right to sell or manufacture goods or to provide service or undertake any process identified with franchisor, whether or not a trade mark, service mark, trade name or logo or any such symbol, as the case may be, is involved. 9.1. On going through the terms of Agreement dated 27.10.2003, we find that the same is titled License Agreement provides that: (i) 2.1. The Licensor (M/s Baxter, U.S.A) grants to the licensee, subject to the limitation and restrictions herein contained, a non-exclusive license under the Patents Rights to make, use, distribute and sell the licensed products in the Territory. This license specifically excludes the rights to grant sub-licenses under the Patents Rights unless authorized by the licensor. --- (ii) 2.3. The Licensor hereby grants to the Licensee, subject to the limitations and restriction herein contained, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been tested abroad by the doctors are sold in India and therefore the same should form part of the assessable value. We are not in agreement with this conclusion for the reason that service tax is not on expenses but is on that portion of the expenses which are paid for the services received. The ratio of the case of Intercontinental Consultants Technocrats (supra) is solely applicable. Hon ble High Court of Delhi held as follows: 18. Section 66 levies service tax at a particular rate on the value of taxable services. Section 67(1) makes the provisions of the section subject to the provisions of Chapter V, which includes Section 66. This is a clear mandate that the value of taxable services for charging service tax has to be in consonance with Section 66 which levies a tax only on the taxable service and nothing else. There is thus inbuilt mechanism to ensure that only the taxable service shall be evaluated under the provisions of 67. Clause (i) of sub-section (1) of Section 67 provides that the value of the taxable service shall be the gross amount charged by the service provider for such service . Reading Section 66 and Section 67(1)(i) together and harmoniously, it seems cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
