Payment Received or Paid to Foreign parties from Abroad are subject to Tax unless those are brought under specific exception: CESTAT Upholds Service Tax Demand under Conference and meeting Sundry expenses [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that all payments received or paid to the foreign parties by the assessees against any service provided/ received from abroad are subject to tax unless those are brought under specific exceptions. 

Linde Engineering India Private Limited, the appellant assessee was registered with the jurisdictional service tax department, having a centralized service tax registration, and engaged in the business of providing taxable output services under the category of consulting engineer services, erection, commissioning, and installation service, and construction services other than residential complex, including commercial/ industrial buildings or civil structures and works contract services, etc. to customers located within /outside India and also engaged in the provision of services to its clients which are spread in various countries. 

The assessee appealed against the order passed by the adjudicating authority for confirming the service tax demand on various services rendered by the assessee such as Professional fee/engineering services, Corporate cost allocation, Consultancy fees, Bank charges, and others amounting to Rs. 4,94,88,067/- along with interest under Section 75 and penalty under Section 78(1) and 77(2) of the Finance Act,1994. 

Venkateshwaran and Nikita Jain, the counsels for the assessee contended that the Adjudicating authority had confirmed the demand on the said expenses on the ground that the assessee had not given any submission or any documentary evidence why no service tax was payable on the same; that to levy the service tax on a particular service, it had to be first established that the service falls under the ambit of taxable service and it also needs to be determined as to who was liable for payment of service tax. 

Also submitted that the impugned order had failed to explain why the services provided by the assessee would be liable to service tax. 

Tara Prakash, the counsel for the department contended that the nonpayment of service tax on the expenditure incurred towards the receipt of taxable services without assigning any specific reason was not permissible under the law; and that these expenditures incurred by the assessee in foreign currency had been made against the taxable services received from the persons situated at abroad and therefore, assessee was liable for payment of service tax on the amount of Rs. 12,77,668.00 under reverse charge mechanism. 

The Bench observed that all payments received or paid to the foreign parties by the assessees against any service provided/ received from abroad (i.e other than goods, sale of immovable property or money/actionable claims, etc.) are subject to tax unless those are brought under the specific exception and once a discrepancy had been brought to the notice of the assessee for a particular amount, the onus lies upon him to prove that the amount was not taxable and failed to prove that the amount paid in foreign currency was not subject to tax liability. 

The two-member bench comprising Ramesh Nair (Judicial) and C L Mahar (Technical) upheld the service tax demand under the category of Conference and meeting Sundry expenses. 

To Read the full text of the Order CLICK HERE

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