2026-VIL-130-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Import of Business Support Services, Service Tax demand from Representative Office, Separate Person - Appellant is a 100% owned subsidiary of Indian entity and is engaged in basic and detailed engineering and project management. It has established a representative office in Saudi Arabia to undertake the execution of projects abroad, including contract implementation, tender participation, and liaison with local authorities. The representative office incurs various expenditures in operating and maintaining the office which are reimbursed by the appellant - Whether the appellant is liable to pay service tax under the Reverse Charge Mechanism on the expenses reimbursed to the foreign representative office, which is alleged to be an import of Business Support Services – HELD - The appellant and its overseas representative office are part of the same legal entity and are not two separate legal persons. In such an event, the overseas representative office cannot be treated as a distinct person for the purposes of taxing any transactions between the two. The transactions between the representative office and the appellant do not satisfy the pre-conditions for the levy of service tax, which requires the presence of two persons and the element of 'consideration' - This Tribunal in the case of Torrent Pharmaceuticals Ltd., held that the permanent establishment of a business person abroad cannot be treated as a separate person from the head office in India for the purpose of service tax. The transactions within the same company cannot be considered as a service, and therefore, no service tax can be levied on such transactions – Further, the expenditure incurred by the representative office is reimbursed by the appellant, and there is no agreed consideration charged by the representative office for carrying out their activities. No service tax can be levied on the transactions between the appellant and its representative office, as they are part of the same legal entity and the transactions do not involve the element of 'consideration' required for the levy of service tax – The impugned order is set aside and the appeal is allowed
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