2018 (7) TMI 1531 – CESTAT HYDERABAD – TMI – Reverse Charge Mechanism – Classification of services are not clear – Demand is sought to be made on the ground that there is a difference between the ledger amounts and the amounts reflected in the Service Tax returns filed by the appellant – Held that:- Hon’ble Supreme Court in the case of Ranbaxy Laboratories Limited vs. Union of India [2011 (10) TMI 16 – SUPREME COURT OF INDIA], held that it is a well settled proposition of law that a fiscal legislation has to be construed strictly and one has to look merely at what is said in the relevant provision; there is nothing to read in; nothing to be implied and there is no room for any indentment”. The order fastening a liability on the assessee has to pass this test.
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On going through the Order-in-Original, it is found that Ld. Commissioner has not examined as to how each of the items of expenditure discussed above amount to services received by the appellant in India and how they are ch
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with a specific direction to compute the demand after specifying how each of the items of the expenditure are chargeable to service tax – appeal allowed by way of remand. – Appeal No. ST/31175-31177/2016 – A/30677-30679/2018 – Dated:- 4-6-2018 – Mr. M.V. RAVINDRAN, MEMBER (JUDICIAL) And Mr. P.V. SUBBA RAO, MEMBER (TECHNICAL) Shri Y. Srinivasa Reddy, Advocate for the Appellant. Shri Arun Kumar, Dy. Commissioner/AR for the Respondent. [Order per: P. VENKATA SUBBA RAO] 1. These appeals are filed by the appellant against the Order-in-Original passed by the Commissioner of Service Tax, Hyderabad. 2. The appellants are manufacturers of pharmaceutical drugs with manufacturing units located across India and also outside India. They have branches and associate companies in countries such as Mexico, Russia, Dubai and Vietnam. These Branches and the Associate companies are located in their own premises and maintain their infrastructure with manpower and are registered as permanent establishments
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ces are chargeable to service tax under Reverse Charge Mechanism and the appellant had not discharged the service tax on these services for which he had paid. As they have not disclosed these amounts in their Service Tax Returns, extended period of demand was invoked and interest under section 75 and penalties under sections 76 & 77 were also proposed to be imposed on the appellant. After following due process of law, Ld. Commissioner confirmed the demand and imposed penalties and interest upon them. The current appeals are against these orders of Ld. Commissioner. Earlier, vide Miscellaneous Order No. M/30081-30084/2018, dated 25.04.2018, the appellant s request for an early hearing was allowed as the amount of service tax liability confirmed is substantial. Accordingly, the matter was listed for hearing today. 3. Heard both sides and perused the records. 4. The appellants have submitted a list of 91 expenses incurred by them on various items on which the service tax is proposed t
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ceipt of IPR through their branch offices. The appellant argues that these are not IPR charges and no IPR service is received in India. In fact, these are the amounts which they have paid to the Governments of those countries to register their intellectual proprietary rights in those countries. Since registration is a statutory function done by the Governments, these services are covered by the negative list of services under Section 66 D of chapter-V of the Finance Act, 1994. It is his further submission that during the relevant period, all services rendered by the government or local authority excluding some specified in that section were exempted. It is only w.e.f. 14.05.2015, the statutory definition for Government has been introduced through Section 65 B(26A) restricting the scope of government to the departments of Central Government, State Governments and Union Territories. Therefore, these services rendered by the respective governments and for which they have aid, appropriate
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so much amount on these charges and no claim for relief is made out by the appellant. The appellants argument is that salaries and other office expenditure are not liable to tax and at any rate without specifying the authority of law, no demand of service tax can be made on these amounts. (f) Sl.No. 35 to 45: These expenses pertain to Clinical Test Charges, Consultancy Charges, Consumption of innovatory samples and testing charges. The department sought to classify the clinical test charges as technical testing and analysis service and Scientific Consultancy Service and had not made any specific classification of the remaining services. Appellant argues that these services were received and consumed outside India and hence no service tax needs to be paid on them. (g) Sl.No. 46 to 91: These are pertain to variety of charges such as Factory Audit Expense, Translation Charges, Audit Expenses, Bank Interest, Factory Maintenance, Repair and Maintenance of computers, Membership and subscript
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ble service has been provided is not correct. In respect of the demand under the category of Business Auxiliary Service, it is alleged by the appellant that the amounts taken by the department for some orders were wrong in the first notice. In respect of one entry head under the head audit expenses , demand was made on an amount of ₹ 31,97,77,299/- whereas the actual amount was only ₹ 3,19,77,299/- thus inflating the amount by ₹ 28.00 crores. They further argued that the department found a difference between the ledger amounts and the ST-3 returns because the ledger amounts reflected the provision made whereas the liability to pay service tax in the case of reverse charge mechanism is on making the payment. The amounts mentioned in the Ledger would include the amounts paid, amounts for which provision was made, amounts relating to past period and amounts which are written off. Therefore, the demand of service tax simply based on the Ledger amount is incorrect. 6. The
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rsed by them. The department s proposal to charge these as business promotion expenses and charge them under reverse charge mechanism is not correct. The appellant relied on the following case laws: (a) Milind Kulkarni and others vs. CCE, Pune [2016-TIOL-709-CESTATMumbai] (b) Genym biotech vs. CCE,Nasik [2016(42)STR 918 (Tri.-Mum.] (c) KPIT Cummins Info System Ltd. CCE Pune [2013-TIOL-1568- CESTAT-Mumbai] (d) CCE Bangalore vs. Pragati Concrete Products Pvt. Ltd [2015(322)ELT 818 (SC)] (e) Sunil Forging & Steel Industries vs. CCE, Belapur [20176(332)ELT 341 (Tri.-Mum.)] (f) CCE Bangalore vs. MTR Foods Ltd [2012(282) ELT 196 (Kar.)] (g) Trans Engineers India Pvt. Ltd. vs. CCE, Pune [2015(40)STR 490 (Tri.-Mum.)] 8. Ld. DR reiterated the arguments made in the Orders-in-Original and vehemently opposed the appeal. It is his submission that the appellant was bound to have filed the returns reflecting the actual amount of services and the service tax liability thereon and paid the service
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ices. 9. We have considered the arguments on both sides and perused the records. The demand is sought to be made on the ground that there is a difference between the ledger amounts and the amounts reflected in the Service Tax returns filed by the appellant. The amounts in the Ledger reflects the amounts transferred by the appellant to their branch offices or associate companies in foreign currency. The Department viewed these as payments made for services rendered by the overseas service provider and consumed by the appellant in India. The appellant argues that the expenses included several expenses which are the office expenses including salaries incurred by their branch offices which are being supported by the appellant. It is also their argument that there were several services for which no classification was made by the department, hence it is impossible to understand and show why the service tax under reverse charge mechanism is not payable on such expenses. 10. As has been held b
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liable to charge to service tax under reverse charge mechanism. It has been held in the case of DHL Express India Pvt. Ltd. (supra) that consideration received from a recipient of service for the services rendered by the provider alone is taxable and the demand for alleged short paid tax must be based on a finding that a specific taxable service has been provided as agreed to be provided and on the consideration that was paid or payable by the recipient of the service to the provider of the service. Similarly, in the present case, where the appellant is supposed to have received the services and is liable to pay service tax under reverse charge mechanism, it is essential that the department say what services were received by the appellant and how they were unclassifiable and how they were liable to be charged under reverse charge mechanism and compute their tax liability accordingly. This is an original work to be done with respect to each of the specific items of expenditure on which
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