Nippon Steel & Sumikin Engineering India Pvt. Ltd. Vs Commissioner of Service Tax Audit (CESTAT Kolkata)
The Kolkata CESTAT partly allowed the appeal against an Order-in-Original confirming Service Tax demand of ₹4,55,59,710, denial of CENVAT credit of ₹6,96,493, interest, penalties, and a separate penalty under Section 77(1)(a) of the Finance Act, 1994. The dispute arose from marketing and administrative support services provided by the appellant, an Indian subsidiary, to its parent company in Japan under annual agreements on a cost-plus basis. The Department alleged that the services were performed in India and therefore did not qualify as export of services.
The Tribunal identified the principal issue as the determination of the service recipient’s location. It found that the agreements clearly established that the recipient of the marketing and administrative support services was the Japanese company, which was located outside India and was responsible for making payment. The Tribunal held that the place of performance of the services had no relevance in determining the recipient of the services. Relying on the Export of Service Rules, 2005, Rule 6A of the Service Tax Rules, 1994, Rule 3 of the Place of Provision of Service Rules, 2012, and judicial precedents, it concluded that the relevant factor for determining export of services was the location of the service recipient. Since the recipient was located outside India, payment was received in convertible foreign exchange, and the statutory conditions under both the positive list and negative list regimes were satisfied, the services qualified as “export of services” and were not liable to Service Tax. Consequently, the Service Tax demand, along with the related interest and penalties, was set aside.
