Services rendered outside India & consumed outside India – whether service recipient liable to pay service tax u/Section 66A merely because registered office of service recipient is in India- stay granted.

PJ/Case Laws/2011-12/1243

Case: M/s ENSO SECUTRACK LTD. v/s CCE, HYDERABAD

Citation: 2011-TIOL-843-CESTAT-BANG

Issue:Services rendered outside India & consumed outside India – whether service recipient liable to pay service tax u/Section 66A merely because registered office of service recipient is in India- stay granted.

Brief Facts:- Appellant have registered office and head office in Hyderabad, India. They were issued “Foreign Currency Convertible Bonds (FCCBs) in international capital market to one M/s Elara capital Plc, London and paid certain amount as transaction amount for the services rendered in relation to the arrangement of issuance of FCCBs. The money so raised by M/s Elara Capital Plc was invested in Mauritius i.e. outside India.

Department alleged that appellant were liable to pay service tax on the services received by them from person situated abroad under reverse charge mechanism.

Demand of service tax with interest was confirmed and penalty was imposed. Hence, appellant is before the Tribunal. Application for stay and pre-deposit is filed.

Appellant’s Contention:Appellant contended that Lower Authorities have held that the services which were rendered by the service provider were received and consumed in India for the only reason that the appellant is having registered office and main office in India. In this regard, it is submitted that the FCCBs were issued in International Capital market and the money so raised was invested in Mauritius i.e. outside India. That the amounts paid as transaction fees to M/s Elara Capital Plc was also paid through the bank account maintained in Geneva.

It was submitted that by virtue of fact that the registered office and head office of the appellant being in Hyderabad, would not in any case be relevant for discharge of service tax on an amount paid from outside India for the services rendered and consumed outside India.

Reliance was placed on the case of Gati Ltd. Vs. CCE, Hyderabad [(2010) 26 STT 255 (Bang.-CESTAT)] wherein the Tribunal, in an identical situation, granted unconditional stay on the ground that if the services are rendered and consumed outside India which would not be liable for taxing in India.

Reasoning of the Judgment:The Tribunal finds that it is an admitted fact that the money raised were invested outside India, but only because the said money raised is supposedly in relation to the benefit or business of the service recipient, located in India, provisions of Rule 3(iii) of the Taxation of Services Rules, 2003 for demand of service tax cannot be invoked.

It was found that the Lower Authorities have not disputed the fact that the money so raised by issuing FCCBs is invested in Mauritius which is outside India and the services rendered were for raising of such money for investment in Mauritius.

It was held that the appellant has made out a prima-facie case for the waiver of the pre-deposit of the amounts involved as it is on record that the services which were rendered by the service provider was outside India and for consumption outside India.

Decision:Stay and waiver of pre–deposit granted.

Comment:- Here the main question is whether such commission charged would be liable for import of service u/s 66 A, even if the service is received outside India and payment is made outside India.

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PJ/Case Laws/2011-12/1243

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