2026-VIL-226-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Liability of service tax on payments made by an Indian company to its overseas Joint Venture for IT services – Dept appeal against the order of the Commissioner dropping the demand of service tax on payments made by the respondent-assessee to its joint venture company - The assessee had set up the JV to provide IT services to clients in the Middle East. The JV would raise debit notes on the assessee as "Consultant pay rolls" which were recorded in the assessee's books as "Consultant Charges" and "Purchase of Service". The revenue alleged that the assessee had not paid service tax on these payments under the categories of "Business Support Service" (BSS) and "Information Technology Software Service" (ITSS) - Whether the payments made by the assessee to the JV located outside India is liable to service tax under the category of "Business Support Service" (BSS) for the period prior to 01.07.2012 – HELD – The words "operational and administrative assistance" have wide connotation and can include certain services already taxed under any other head of more specific description. The scope of BSS under Section 65(105)(zzzq) was expanded to include "operational or administrative assistance" only with effect from 01.05.2011 and not earlier. Therefore, the demand of service tax on the payments made by the assessee to the JV prior to 01.05.2011 is not sustainable. The appeal filed by Revenue for charge of service tax on the disputed activity, prior to 01.05.2011 does not have the support of law - For the period post-01.07.2012, when any service is provided outside the taxable territory between two persons who are not connected to the branch office in India and the services not being provided to the Assessee situated in India, such services cannot be brought under the tax net for payment of service tax – Further, as per the Place of Provision of Service Rules, 2012, the location of the service recipient determines the taxability of the service. In the present case, since both the service provider (JV) and the service recipient (assessee) are located outside India, and the services were rendered and consumed outside India, the same cannot be brought under the service tax net in India – The payment of consultancy charges paid by the Respondent-Assessee to JV situated abroad, in the present set of facts cannot be subjected to levy of Service Tax under the Finance Act, 1994 - The order of the Commissioner dropping the demand of service tax on the payments made by the assessee to the JV located abroad is upheld and the Revenue appeal is dismissed
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