Fox Conn India (P) Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
There is no agreement furnished by the department to establish that the appellant has received management consultancy service from M/s. Fox Conn, China. On perusal of the invoices, it is seen that the amounts are in the nature of vehicle hire charges, cost of fuel charges, hostel charges, selling expenses, meal expenses, salary to staff attending the foreign personnel etc. There is no evidence for payment of remuneration to the foreign personnel in foreign currency by the appellant. Even though the appellant might have expended huge amounts for the said foreign personnel, unless there is evidence that these amounts are paid to foreign personnel for providing management consultancy service, the demand is incorrect. The demand is raised under reverse charge mechanism as seen in para 3.3 of the Show Cause Notice. It is stated that appellant is liable to pay service tax with effect from 18.4.2006 in terms of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994. There is no evidence of payment in foreign currency to the foreign personnel. The invoices on which the demand of management consultancy service is raised shows merely expenses incurred by the appellant in Indian currency in the nature of hotel, transport and other expenses. There is no evidence to prove that they have received management consultancy service or paid fees for such services so as to be liable to pay service tax under reverse charge mechanism. On this ground, we hold that the demand under Management Consultancy Service cannot sustain.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The appellants are engaged in the manufacture of parts of mobile phones, IP Phones etc. They are registered with the Service Tax Department. During the course of audit, it was noticed that the appellants were manufacturing and clearing certain specific models of cellular phones to M/s. Sony Ericsson Mobile Communications (I) Pvt. Ltd. To make these mobiles phones functional, certain software was provided by the holding-company who had developed the software and obtained the patent right for the software. The appellant paid the license fee to M/s. Sony Ericsson, Sweden on monthly basis for using the said software. Intellectual Property Service was brought into service tax net with effect from 10.9.2004. From the invoices issued by M/s. Sony Ericsson, Sweden, it was observed by the department that the amount collected by them towards license fee was for using the software provided by them which would fall under IPR services. Since M/s. Sony Ericsson, Sweden does not have any office in India, the appellant has to discharge the service tax liability under reverse charge mechanism. The appellants did not pay service tax on IPR services.
2. It was further noticed that M/s. Fox Conn, China had provided Management Consultancy Service to the appellant. Chinese engineers were provided by M/s. Fox Conn, China to the appellant company from time to time as per the arrangement termed as “EXPART”. There was no written agreement between the appellant and M/s. Fox Conn, China for rendering advice in the field of management, know-how, skills etc. The appellant had paid DA amount to the foreign engineers / professional to cover their incidental expenses. The payment of such amount would fall under Management Consultancy Service which was brought into the service tax net with effect from 16.10.1998. The appellants are liable to discharge service tax under reverse charge mechanism under Management Consultancy Services for the period April 2006 to March 2009 which they did not pay.
3. Show Cause Notice dated 8.4.2010 was issued proposing to demand service tax under the above two categories. After due process of law, the original authority confirmed the demand, interest and imposed penalty. Aggrieved by such order, the appellant is now before the Tribunal.
4. On behalf of the appellant, ld. Counsel Shri M.N. Bharathi appeared and argued the matter. The details of the period and the amount is shown in the Table below:-
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