ST - If services have not been received and payment made for said services had been adjusted between Indian and Amsterdam Company, said corresponding value of services would not be liable to Service Tax: CESTAT
By TIOL News Service
NEW DELHI, MAY 07, 2014: THE appellant is registered with service tax Department for providing Convention Services, Computer Network Services, Business Auxiliary Services, Commercial Training or Coaching Service, Sponsorship Services and Management or Business Consultant services. They filed a refund claim of Service Tax for the period October 2009 to March 2010 on 18/03/2011.
The ground of refund claim is that the party has entered into an agreement with M/s. Wolters Kluwer NV, Amsterdam, Netherlands for providing service of Management or Business Consultant from abroad in respect of management of their ongoing office in India and also to provide service related to Mergers and Acquisitions deals on behalf the party. The assessee, as mentioned, got registered in the category of Management or Business Consultant service since they were liable for service tax under reverse charge.
M/s. Wolters Kluwer NV Amsterdam provided services related to ongoing management of their India office through their representatives mentioned in their invoice for value of US$ 1,20,108.21. Later M/s. Wolters Kluwer NV Amsterdam raised invoice no. 9453 to debtor number C0088 dated 28.12.2009 for consolidated Management fee 2009 amounting to EUR 343,880.25 equivalent to the value of Rs.2,35,97,062.76 (Inclusive of VAT to be paid by M/s Wolters Kluwer NV Amsterdam) which included the value of service pertaining to Mergers and Acquisitions deals which had not been provided, as claimed, so far by them.
The assessee paid the full value of invoice and also deposited Service Tax of Rs.20,42,435/- on reverse charge basis.
The assessee took up the matter with M/s. Wolters Kluwer NV Amsterdam and objected to the Mergers and Acquisition (M&A) charges charged from them. After negotiations, M/s. Wolters Kluwer NV, Amsterdam apportioned EUR 236,400 and issued their Credit invoice through their Bank, Royal Bank of Scotland, Amsterdam. The assessee has since realized the said credit amounting to EUR 267,965.51 through their Bank CITI BANK N.A. Vide the Bank realization certificate no. 3120774171 dated 10.11.2010.
Consequently, the appellant filed refund claim of the proportionate service tax paid under reverse charge for which they have not received any services. They also declared in their refund application that no CENVAT Credit under the provisions of CCR, 2004 has been claimed by any of the party of the Service tax amount which is a subject matter of refund claim.
The original adjudicating authority as also Commissioner (Appeals) held against the appellant and hence they are before the CESTAT.
The CESTAT found it prudent to extract the finding of the original adjudicating authority which was reproduced by the Commissioner (Appeals) while dismissing the appeal.
It reads -
"I observe that this was an afterthought and financial adjustment between the Corporate Office and the Associate Enterprises. When the party, an associate enterprise, is working under control of the Corporate Office, financial transactions between them, whether payments made or received back, may have been done for adjustment only just to suit their benefit. This fact is also seen from the transactions that CO renders services on verbal arrangements, raises invoices for Rs.19,829,465/- + VAT Rs.3,767,598/-, CO ask the party to pay only Rs.19,829,465/- as they will settle the VAT with Dutch tax authority on behalf of the party, invoice raised in December 09 service tax paid in March10 payment of invoice made in June10 to CO, means party paid service tax in March without making payment to the CO and then paid whole amount to CO while discussions were going on with regards to M&A charges, then all of sudden CO issued credit note & refunded the amount without mentioning any reason for admitting the contention of the party. Neither the party had made payment according to the invoice value (either in EUR or INR) nor did the CO return back the payment in accordance to Credit Note (either in EUR or INR)."
The Bench observed that the observations of the adjudicating authority are in the nature of assumption and presumption and not based upon any evidence on record to show that the appellant had received services of Mergers and Acquisitions from Amsterdam Company. Furthermore, if the services have not been received and the payment made for the said services had been adjusted between the Indian and Amsterdam Company, the said corresponding value of the services would not be liable to Service Tax, the Bench added.
After setting aside the order, the CESTAT remanded the matter to the lower authorities to find out the factual position as to whether the services were received by the appellant or not.
Nonetheless, the Bench also mentioned - If services were actually not received, the refund of the Service tax being paid by the appellant is to be refunded to them without raising the issue of unjust enrichment inasmuch as it is the tax deposited by the appellant himself which is being sought to be refunded.
The appeal was allowed by way of remand.
(See 2014-TIOL-714-CESTAT-DEL)
