The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed the Service Tax demand as remittances made for meeting establishment costs at the location of Branches.
The appellant, M/s Kusum Healthcare Ltd has challenged order-in-original of Commissioner of Central Excise, Alwar demanding tax of Rs.4,28,30,862 for 2014-15 on the finding that remittances made to their branches and offices abroad were ‘consideration’ for ‘taxable service’ procured from outside the ‘taxable territory’ which, according to Learned Counsel for the appellant, is inconsistent with decisions of the Tribunal in which demands on identical grounds for the preceding periods had been set aside.
The interest liability under section 75 of Finance Act, 1994 as well as penalty under section 76 and section 77 of Finance Act, 1994 are also sought to be quashed. Another submission in the grounds of appeal, though not pressed in the light of these binding precedents, is that their explanation of these remittances as payments for supplies procured by overseas branches and offices, which would have excluded them from being deemed to have received in the ‘taxable territory’, was not considered in the impugned order that, according to Learned Counsel, was further susceptible for having been founded on statutory provisions and Rules that had ceased to be in vogue by then.
It is the admitted flow of funds for maintenance and upkeep of the branch offices that have been presumed to be the quid pro quo for the rendering of ‘taxable service’ by the branch to the principal office. That the remittances were made for meeting the establishment costs at the location of the branches is not disputed.
The coram headed by the President, Justice Dilip Kumar Gupta, and Technical Member, CJ Mathew held that Central to the revised schema is with ‘provided or agreed to be provided in the taxable territory’ as the frame of the event to be taxed. The mechanism for determination of any ‘service’ to have been rendered within the jurisdiction of such levy is established under the authority of Neither of these provisions makes passing reference to ‘consideration’ which finds a place in section 67 of Finance Act, 1994 and, for elaborating of the taxable event in section 66B of Finance Act, 1994 and of ‘taxable service’ wherever occurring, in of section 65B of Finance Act, 1944. On perusal of Place of Provision of Service Rules, 2012 that, by emphasis or by deeming so under the authority of section 66C of Finance Act, 1994, maps the boundary of ‘services provided or agreed to be provided in the taxable territory, it is seen that rule 4 to rule 6 and rule 9 to rule 12 address specific situations of deeming that do not find fitment within the default in rule 3; rule 7 is a determinative weightage for certain circumstances and rule 8 intends distribution of domestic jurisdiction.
The Tribunal relied upon Kusum Healthcare Ltd to set aside the demand after the introduction of a ‘negative list’ regime is similarly applicable to the present dispute.
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