Lehman Brothers Securities eligible for Refund of Service Tax paid for Legal Consultancy Services received during Closure: CESTAT [Read Order]

Service Tax Refund - Lehman Brothers Securities - Service Tax - Legal Consultancy Services - Closure - CESTAT - Taxscan

The Mumbai bench of the CESTAT has held that Lehman Brothers Securities Pvt Ltd, is entitled for the refund claim of Service Tax paid by them ‘under protest’ under Reverse Charge Mechanism for the legal consultancy services received by them for winding up of their business.

The appellant herein were into Business Auxillary Services, Management or Business Consultancy Services etc. and were paying Service Tax under Reverse Charge Mechanism for the legal consultancy service. Their ultimate holding i.e. Lehman Brothers holding Inc. USA filed a petition for bankruptcy in US in September, 2008 and Lehman Brothers Investment Pte. Ltd. Singapore, the immediate holding company was placed into creditors voluntary liquidation. Subsequently, the appellant entered into an international Asset Sale Agreement dated 29.09.2008 with Nomura Holding Inc. In terms of the said agreement, the employees and certain assets of the appellant were transferred to Nomura Holding Inc. They suspended their business activities and surrendered their licenses with National Stock Exchange and Bombay Stock Exchange and their financial statements were not being prepared on going concern basis. In order to closure and winding up of the business, the Appellant received certain Legal consultancy services and discharged Service Tax ‘under protest’ on the said services on reverse charge basis and claimed refund of the same.

The department held that the claimant is a ‘business entity’ and hence exemption notification No. 25/2012-ST dated 20.06.2012 is not applicable to them as the exemption has been granted for service provided by an individual or an advocate or a partnership firm of advocates by way of legal services to any person other than ‘business entity’.

Mr. Ajay Sharma, Judicial Member observed that the term ‘business entity’ is defined under section 65B(17) to mean “any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession.”

“Here ordinarily means normally or in normal course. Therefore, it can be said that ‘business entity’ is a person who ordinarily carries out activity for profit. However, if any person is not carrying out any activity for profit, then the person cannot be considered as ‘business entity’. Therefore, for applicability of this definition the appellant has to normally or in normal course, indulged in any activity which is profit motivated,” the Tribunal said.

Concluding the order in favour of the appellant, the Tribunal held that merely because the appellant is still registered under the Companies Act and has not get the said registration cancelled does not mean that they are carrying out business activity.

“It is nowhere the case of the Revenue that the appellant is indulged into any activity relating to its business after the year 2008. The learned Commissioner has specifically recorded in the impugned order that there is no dispute that the appellant have stopped their business activity and are in the process of winding up. But Still an apprehension has been recorded by the learned Commissioner that the appellant ‘can’ carry out activity related to their business as they have not surrendered their registration under the Companies Act, 1956 and therefore they fall under the preview of definition of ‘business entity’. In my view the said apprehension of the learned Commissioner is totally unfounded as neither any document has been placed on record to show that the appellant indulged in any business activity during last so many years nor it is mentioned in the Show Cause Notice or in any of the case records that the appellant had earned any profit from their business activity during these years. The appellant cannot be saddled with any tax liability only on the basis of apprehension,” the Tribunal said.

Subscribe Taxscan Premium to view the Judgment

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.

taxscan-loader