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TMI Blog2024 (9) TMI 1598X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department is in error in taking the Service value of USD 2490000 [Rs.11,17,88,550] towards the Data Usage charges to confirm the Service Taxdemand of Rs.1,15,14,221. Therefore, the demand to this extent set aside on merits, and the appeal is allowed. Demand of Rs.5,65,983 on account of the Legal Services utilized by the appellants - HELD THAT:- The Legal Services have been brought under Service Tax bracket vide Notification No.30/2012 ST dated 20.6.2012 [effective from 1.7.2012], wherein as per Sl No.5 of the Table, the Service Tax in respect of the Services rendered by individual advocate or firm of advocates, the Service Tax is required to be paid by the recipient of service.Thus this service became taxable for the first time with effect from 1.7.2012. Though the Service Tax to be paid on Reverse Charge basis in respect of import of services was already been place with effect from 18.04.2006 in view of Section 66A, the service in question has to be first of all be taxable service per se so as to attract the provisions of Section 66A. In this case since Legal services were not under Service Tax bracket till 1.7.2012, Section 66A provisions cannot be directly applied to demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ER Per : R. MURALIDHAR : The appellants are 100% Export Oriented Undertaking registered with Software Technology Parks of India (STPI) Kolkata, engaged in providing services in the category of Information Technology Software Services, holding Service Tax registration certificate no. AAOCS2113DSD001. After verification the Department found that the Appellant had incurred expenditure in foreign currency towards consultancy charges, database usage and they have also paid royalty/management/consultancy fee for receiving such services from outside India. As per Revenue, this would be covered under import of Services under Section 66A of the Finance Act,1994 read with Taxation of Services (Provided from outside India and received in India) Rules 2006. A Show Cause Notice was issued on 23.10.2013, by invoking the extended period provisions, for the period 2008-09 to 2011-12, demanding Service Tax amounting to Rs.1,84,64,342. The appellants made their submissions questioning the quantification and provided documentary evidence towards their defence and submitted that they are not required to pay the demanded amount. After due process, the Adjudicating authority dropped the demand to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure wrongfully considered by the department and service tax there on which is not corroborating with finacial data of the appellant Total Year USD INR USD INR USD INR USD INR INR Total USD Total INR 2009- 10 2490000 111788550 35552 1647193 10833 488554 0 0 27000 2536385 113951297 2010- 11 0 0 58580 2718140 106801 5006424 44783 2078499 0 210164 9803063 Total 2490000 111788550 94132 4365333 117634 5494978 44783 2078499 27000 2746549 123754360 Rate of Tax Inc. Cess 10.30% 10.30% 10.30% 10.30% 10.30% 10.30% Total S.Tax 11514221 449629 565983 214085 2784 12746702 6. He submits that the appellants has the following pleadings towards non-requirement of Service Tax payment of the above services : A. Database Usage charges Demand : Rs.1,15,14,221/- : While in the books of accounts they have provided for the amount to be paid to the overseas entity [USD 2490000], due to severe recession, after mutual discussion and understanding with the overseas exporter, this amount was never paid to them. The details of the non-payment to them would be proved by way of duly certificate issued by the Chartered Accountant, Income Tax entries, Bank Certificate etc. which are enclosed with the Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The appellant also submitted the certificate issued by the Statutory Auditor; State Bank of India, MSE Br. Salt Lake, STPI A Govt. of India enterprise evidencing that no payment was made by the appellant towards database usage charges to FICO. All these certificates are provided in Annexure 18 Pg No.209 to 211, Annexure 20 Pg No.215, Annexure 22 Pg No.219 to 220 of the Appeal Book. f. It is evident from all these certificates that the appellant did not make the payment to FICO towards database usage charges. g. Furthermore, the appellant states that the entire liability towards database usage charges to the tune of Rs. 111788550/- which was booked during F.Y. 2009-10 was written off in respective financial years based on the waiver of the invoice values by the FICO. The treatment of written off of liability was brought to the P L A/c as income in respective F.Y and the appellant paid Income Tax thereon. Certificate of statutory auditor certifying the same is provided in Annexure-22 Pg. no. 219 to 220 of the Appeal book. Also, write off of database usage liability and considering the same as income in the books of accounts F.Y. wise is given in Annexure-23 Pg No. 242 of the Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 288 to 300. The appellant states that salary does not come within the purview of section 65(105) of the Finance Act, 1994 and is considered as non-taxable services during the relevant F.Y. 2010-11. Hence, service tax to the tune of Rs. Rs.214085/- demanded on account of Salary may be set aside. D. Reimbursement of Expenditure - Demand Rs.4,49,629 Regarding reimbursement of marketing expenses paid to pure agent in USA for services received and exhausted in USA during F.Y. 2009-10 and 2010-11, the appellant submits that it made payment in foreign exchange towards reimbursement of expenses like travelling, conveyance, food, advertisement, banners, etc. These were out of pocket expenses reimbursed to pure agent of the Appellant on actual basis. All these payments were made through SBI SME Branch. Documents submitted to SBI SME Branch for remittance towards reimbursement of marketing expenses abroad are provided in Annexure 29 Pg no.383 to 557. Since there is no Service Tax liability on reimbursements, the confirmed demand of Rs.4,49,629 may be set aside. E. Quantification error Service Tax demand : Rs.2784/- [2009-10] There is an error in quantification of demand resulting in confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the services from overseas, is required to discharge the Service Tax on Reverse Charge Mechanism basis, except in case of certain exceptions created on account of such services being received by individuals. Therefore, in the normal course, the Service Tax is required to be paid by the appellant if the payments have been made for overseas services received by them. 13. The main argument of the appellant in this case is that though they have made the provision towards the payment to be made towards the Database Usage charges to the overseas service provider, in view of the prevailing global financial crisis, based on a mutual agreement, the service provider waived the consideration to be paid to them. Therefore, as per the appellant though a provision has been made, as a matter of fact, this never resulted in actual payment / outflow of the foreign exchange to the overseas exporter. Hence, it is their argument that no Service Tax is required to be paid. 14. We have gone through the documentary evidence relied upon by the appellant to substantiate their arguments. The following documents are found to be relevant to the issue on hand : (i) E mail from the appellant dated 30.11.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.219 to 220] addressed to the Commissioner Service Tax 1 by the Chartered Accountants, Sen Ray, certifying that the Database Usage Charges created as a liability at USD 2490000 in 2009-10, modified to USD 622500 in 2010-11, further modified to USD 500000 in 2011-12 was never paid and was Written Off‟ in its entirety and considered as income in the books of account of the appellant. It certifies that the liability created towards Legal Consultancy Charges during the year 2009-10, was paid during the year 2010-11. This is produced as one of the evidence by the appellant for not having paid the Data Usage Charges of USD 2490000. 14. In this case, mere submission by the appellant that Data Usage charges have not been paid, would not be sufficient to take it on the face value. We have to see as to whether enough evidence has been produced / adduced or not. We find that the above documentary evidence brought in by the appellant as discussed in Para 13 above, clearly proves beyond doubt that the appellant never paid the Data Usage Charges to the overseas service provider. The Department is in error in taking the Service value of USD 2490000 [Rs.11,17,88,550] towards the Data Usage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 160 documents like the main invoice, the connected expenses details like hotel bills, travel bills etc., to fortify their arguments. It would not be possible for the Tribunal to go through these documents to come to a conclusion as to whether they are in the nature of reimbursement or not. However, we are setting aside this demand of Rs.4,49,629 in view of the details being discussed in the coming paragraphs. 18. On going through the Show Cause Notice, we find that the allegation was that the appellants were incurring expenditure through foreign exchange outflow in respect of (a) royalty (b) management (c) consultancy fee (d) Data usage charges falling under BAS. During the period under consideration, i.e prior to 1.7.2012, the Show Cause Notice was required to be specific about the nature and classification of service under the Service Tax was being demanded. From the SCN, it is noticed, that though there is a mention of these four services, the final quantification has not even been done service-wise. The quantification was done based on the provision made each year, without even specifying the service under which the demand is made. In the landmark judgement of case law of CCE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d period provisions do not survive. A case in point is the decision of Tribunal Hyderabad, which in the case of Asmitha Microfin Ltd v Commr. Of Cus., C. Ex ST, Hyderabad-III, [2020 (33) GSTL 250 (Tri- Hyd)] wherein the Hon'ble Bench after placing reliance on the judgment of the Hon'ble Apex Court in Jet Airways (India) Ltd. v. Commissioner [2017 (7) G.S.T.L. J35 (S.C.)] has held that:- However, we find that the demand is for the period April, 2009 to March, 2012 and the show cause notice was issued invoking extended period of limitation on 17-10-2014. The entire demand is under reverse charge mechanism and if the appellant had paid the service tax under reverse charge mechanism, they would have been entitled to Cenvat credit of exactly the same amounts. Therefore, the revenue neutrality in this case is evident. It has been well settled at the hands of the Apex Court in the case of Jet Airways (supra) that extended period of limitation cannot be invoked in revenue neutral cases. Therefore, the entire demand is hit by limitation and therefore needs to be set aside. The impugned order is set aside and the appeal is allowed 20. In the present case, the ratio laid down is squar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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