2025-VIL-1690-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – SEZ Unit, Payments made to branch office situated outside India, Place of provision, Intermediary services - Respondent incurred expenditure in foreign currency, but had not paid service tax under the reverse charge mechanism on such expenditure – Demand of service tax on various heads of expenditure incurred by the respondent in foreign exchange for export of software solutions - Whether the expenditure incurred by the respondent in foreign exchange for reimbursing the marketing and sales promotion expenses and other expenses through its branch office located outside India is taxable under service tax under RCM - HELD – All the expenditure incurred by the Head office in India/respondent in foreign exchange for reimbursing the marketing and sales promotion expenses and other expenses through the branch office and all the services rendered by the foreign agents were all done through the branch office at UK, i.e. out of India are fully covered under Rule 9(c) of POPS, 2012 as ‘intermediary services’. Further, the invoices placed on record shows that the expenditure is including all local taxes which intermediary agents or consultants rendered, performed and consumed services out of India. Thus, the respondent is having its independent branch in UK, who are facilitating and providing services to their various clients and the respondent merely reimburses the expenditure to the branch, which do not fall in the category of taxable services under RCM - The expenditure incurred by the respondent in foreign exchange for reimbursing the marketing and sales promotion expenses and other expenses through its branch office in the United Kingdom is not taxable under service tax - The impugned order is affirmed and the appeal filed by the Revenue is dismissed - Whether the respondent, being a SEZ unit during the relevant period, is eligible for the exemption from payment of service tax - HELD - The respondent was registered as a SEZ unit until August 2012, and the provisions of the SEZ Act provide for an overriding effect over any other law. Further, the Central Government had issued notifications to provide unconditional exemption to services provided in relation to authorized operations in SEZ. Considering these provisions, the liability of service tax cannot be imposed on the respondent during the period it existed as a SEZ unit.
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