2018 (11) TMI 1216 – CESTAT CHENNAI – TMI – Reverse charge mechanism – Club or Association Services – expenditure incurred by the appellants in respect of the services provided by persons situated outside India and expenditure incurred for their branch office operations – Rule 3(1)(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules 2006.
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Held that:- Rule 3(ii) specifies performance based category services, namely, specified taxable services performed in India; even part performance being sufficient for requiring discharge of service tax under reverse charge – From the facts on record, it is found that the impugned services provided outside India will fall within the ambit of Rule 3(ii).
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Even as per the show cause notice, it is alleged that the services provided in Thailand and other places are leviable to service tax since it is intended for members in India. Thus, department does not have a case that the impugned services are physically
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India and expenditure incurred for their branch office operations are in relation to providing services under the category of Club or Association Services ; that these services are intended for the members in India; hence the said services require to be considered as having been performed in India in terms of Rule 3(1)(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules 2006. A show cause notice dated 27.3.2009 was issued proposing demand of service amounting to ₹ 1,48,25,547/- along with interest for the period 1.10.2003 to 31.3.2008 on the said services, on reverse charge basis. The show cause notice also proposed imposition of penalties under various provisions of law. In adjudication, vide the impugned order dated 21.6.2011, the Commissioner confirmed a reduced amount of ₹ 1,43,60,316/- with interest and also imposed penalties under Sections 76, 77 and 78 of the Finance Act. Hence this appeal. 2. Today, when the matter came up for hear
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e and that the correct amount is ₹ 42,56,951/-. 2.4 Services rendered by persons located outside India and received are taxable with effect only from 18.4.2006 on enactment of Section 66A of Finance Act, 1994 as settled conclusively by the judgment in Indian National Shipowners Association – 2009 (13) STR 235 (Bom.). 2.5 With regard to branch office expenses, the transaction therein represents transfer of funds towards expenses of branches located outside India to meet its normal business expenditure. Such fund transfer is in accordance with the business decision of the appellant to support the branches that render services outside India. There is provision of service by the branch to the head office which can be termed as taxable service rendered in India. 2.6 Ld. counsel relies upon the decision of the Tribunal in Tech Mahindra Ltd. Vs. Commissioner of Central Excise – 2016-VIL-625-CESTAT-MUM-ST and 3i Info Tech Ltd. Vs. Commissioner of Service, Mumbai – II – 2017-VIL-04-CESTAT
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y them and the benefit of all the services rendered have accrued only to them for development of business. Hence the impugned services rendered are required to be considered as having been performed in India. 4. Heard both sides. 5. Rule 3 of the Taxation of Service Rules, 2006 lays down the situations where taxable services provided from outside India and received in India will be treated as performed in India and value thereof will become exigible to service tax. Rule 3(i) specifies the list of services provided in relation to immovable property situated in India. Here the service tax on such services will have to be paid under reverse charge mechanism. Rule 3(ii) specifies performance based category services, namely, specified taxable services performed in India; even part performance being sufficient for requiring discharge of service tax under reverse charge. Rule 3(iii) specifies the residuary list of taxable services and those services as are received by a recipient located in I
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