2025-VIL-108-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Head office expenses, Business support services, Place of provision of services - Service tax demands on head office executive and general administrative expenses allocated by its UK head office to the Indian branch - Department treated these expenses as taxable 'business support services' provided by the head office to the Indian branch - Whether the allocation of head office expenses by the UK head office to the Indian branch would amount to provision of 'business support services' and be liable to service tax under Finance Act, 1994 - HELD - The allocation of head office expenses by the UK head office to the Indian branch would not amount to provision of 'business support services' liable to service tax. There was no contractual relationship or payment of consideration between the head office and the Indian branch for any specific services - The mere allocation of head office expenses to the branch for compliance with income tax laws does not create a service provider-recipient relationship attracting service tax. The principles laid down in earlier decisions that transactions between distinct persons located outside India and reimbursement of expenses cannot be taxed under service tax law, which is a destination-based indirect tax - The Section 66A, deems the branch and head office as distinct persons for the purpose of service tax, is only to determine the place of provision of services and does not automatically lead to service tax liability on intra-group transactions without actual provision of services. Accordingly, the service tax demands on the head office expenses allocated to the Indian branch is set aside and the appeal is allowed - Revenue appeal against the dropping of service tax demands for the period prior to 01.05.2011 on the ground that the definition of 'business support services' was expanded from that date to include 'operational or administrative assistance' - Whether the service tax demands for the period prior to 01.05.2011 were correctly dropped on the ground that the definition of 'business support services' did not cover 'operational or administrative assistance' during that period - HELD - The service tax demands prior to 01.05.2011 were correctly dropped as the expansion of the definition of 'business support services' to include 'operational or administrative assistance' was only prospective from that date - Government had clarified that the amendment was to expand the scope of the service and the term 'operational or administrative assistance' had a wide connotation. Therefore, the services covered under this term were not taxable prior to the amendment.
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