The Ahmedabad bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that service provided to associate company falls under category of export if service provider and recipient are two distinct persons.
The appellant, Celtic Systems Private Limited is engaged in the business of providing IT service. The appellant provides IT service to their associate company M/s Celtic Cross Holding Inc. USA. The Adjudicating Authority demanded the Service Tax holding that the supply of service by the appellant to company M/s Celtic Cross Holding Inc. USA does not amount to export on the ground that both the appellant and service recipient are falling under same entity, hence, they are not a distinct person in accordance with Clause (f) of Rule 6A (1) of Service Tax Rules, 1994, the Service does not fall under the category of export.
The appellant filed appeal before Commissioner (Appeals) against the demand, which upholds the decision of adjudicating authority. Aggrieved, appellant filed appeal before CESTAT.
The counsel for the appellant submitted that appellant company and
the service recipient company are two different entities as both are separately registered as an independent company in respective countries. The shareholders of both companies are also different even though some of the directors are common, therefore, both are different and distinct person. A note was given in the balance sheet of the appellant company that the service recipient’s company is an Associates Company of the appellant does not alter the legal status of independent entity of both the companies.
The Tribunal has observed that the appellant and M/s Celtic Cross Holding Inc. USA are constitutionally two different entity. Therefore, following the judgment of Gujarat High Court in Linde Engineering India Pvt. Ltd & Ors, it is clear that the appellant and the service recipient are two distinct person, hence, the service provided by the appellant to M/s. Celtic Cross Holding Inc. USA clearly falls under export of service
The Coram of Mr. Ramesh Nair, Member (Judicial) and Mr. Raju, Member (Technical) by relying the decision of Gujarat High Court in Linde Engineering India Pvt. Ltd & Ors has held that “we are of the view that the demand confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) is not correct and legal. The impugned order is set aside, appeal is allowed”.
Mr. Manan K Bhatt, CA appeared for the appellant and Mr. J. A. Patel, appeared for the Respondent.
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