2025-VIL-2148-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax – Sections 65B(44) and 66B of Finance Act, 1994 – Rule 4 of Place of Provision of Services Rules, 2012 – Payments made to subsidiary – Demand of tax – During audit, department noticed that Appellant had not paid Service Tax under Reverse Charge Mechanism on certain payments made to its subsidiary located outside taxable territory – Based on audit findings, department issued show cause notice proposing demand of Service Tax – Adjudicating authority confirmed demands as proposed in show cause notice – Whether foreign subsidiaries/licensees have rendered any service to Appellant within meaning of Section 65B(44) of the Act – HELD – Section 65B(44) of the Act requires an activity by one person for another for a consideration. None of agreements create an activity performed for Appellant. Department had not produced a single document evidencing any service obligation owed by licensee to Appellant. First and foundational requirement of a taxable service is absent in this case – Appeal partly allowed - Making of payments – Whether payments made to licensees constitute “consideration” for any imported service – HELD – Department placed reliance on debit notes, which does not represent consideration for any service rendered by licensee. Impugned remittances are not any consideration, but mere settlement of inter-company commercial arrangements. Revenue sharing arrangements do not involve provision of service by one person to another - Import of services – Tax liability – Whether alleged activities are taxable in India in terms of Section 66B of the Act and the Rules – HELD – Undisputed facts show that all implementation activity by licensees is performed at foreign customer sites. Implementation is a performance based service and so covered under Rule 4 of the Rules and place of provision is the place where the service is actually performed. Alleged activity is performed outside India and not covered under Section 66B of the Act, which taxes only services provided in taxable territory. Impugned Order-in-Original confirming demand of Service Tax under alleged category of import of services is set aside - Demand of short paid service tax – Sustainability – Whether impugned order confirming demand of service tax allegedly short paid towards service provided to SEEC Asia is sustainable in view of admitted clerical error and full tax payment – HELD – Appellant is not disputing the liability for service tax payment, but he is repeatedly affirming that payment had been made, but due to clerical mistake, tax was not reflected in ST-3 returns. Appellant had submitted a reconciliation statement to demonstrate that actual Service Tax liability stood fully discharged. Reconciliation statement relating to payment of service tax needs verification. Issue is remanded for carrying out such verification with a notice to Appellant. After verification, if service tax payment is already paid as repeatedly submitted by Appellant, demand would not survive.
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