Case Law Details
Linde Engineering India Pvt. Ltd. & Ors. Vs Union of India (Gujarat High Court)
Rule 6A of the Service Tax Rules, 1994 provides that services rendered would be treated as ‘Export of services’ when clause (a) to clause (d) refers to provider of service is located in the taxable territory and recipient of service is located outside India and the service is not a service specified in Section 66D of the Act and the place of the provision of the service is outside India and as per clause (e) the payment for such service has been received by the provider of service in convertible Foreign Exchange. It emerges that the petitioner is fulfilling all the conditions, however, so far as the clause (f) of Rule 6A of Rules, 1994 is concerned, it provides that the provider of service and recipient of service are not merely establishments of a distinct person in accordance with Item (b) of explanation 3 of clause (44) of Section 65B of the Act. As per clause (44) of Section 65B of the Act, 1994 “service” means any activity carried out by a person for another for consideration, and includes a declared service. Item (b) of the explanation 3 stipulates that an establishment of a person in taxable territory and any of his other establishment in a non-taxable territory shall be treated as establishments of distinct persons. Therefore, a question arises in the fact of the present case, whether the services provided by the petitioner No.1 located in India which is a taxable territory and the recipient of the service i.e. holding Company of the petitioner No.1 located outside India which is a non- taxable territory, whether both of them would be two establishments of the same Company or not so as to treat them as distinct persons liable for service tax. If the answer to this question is in affirmative, as interpreted in the impugned show cause notice that providing the services by the petitioner No.1 to its parent Company would be to the establishment of the petitioner and therefore it would be a distinct person. then rendering of service by the petitioner No.1 cannot be treated as “Export of Services” as per Rule 6A (f) of Rules, 1994 because as per explanation 3(b) to Section 65B(44) of the Act, 1994, the petitioner and holding Company are to be treated as distinct person as per the understanding of the respondent No.3, and therefore the petitioner would be liable to pay service tax.
However, on analysis of the aforesaid provisions, it appears that the respondents have assumed the jurisdiction on mere misinterpretation of the provisions of explanation 3 (b) to Section 65B(44) of the Act,1994 read with Rule 6A of the Rules, 1994 as by no stress of imagination, it can be said that the rendering of services by the petitioner No.1 to its parent Company located outside India was service rendered to its other establishment so as to deem it as a distinct person as per Item (b), explanation 3 of clause (44) of Section 65B of the Act, 1994, the petitioner No.1 which is an establishment in India, which is a taxable territory and its 100% holding Company, which is the other company in non taxable territory cannot be considered as establishments so as to treat as distinct persons for the purpose of rendering service. Therefore, the services rendered by the petitioner No.1-Company outside the territory of India to its parent Company would have to be considered “export of service” as per Rule 6A of the Rules, 1994 and Clause (f) of Rule 6A of the Rules, 1994 would not be applicable in the facts of the case as the petitioner No.1, who is the provider of service and its parent Company, who is the recipient of services cannot be said to be merely establishment so as to be distinct persons in accordance with Item (b) explanation 3 of Clause (44) of Section 65B of the Act, 1994.
In such circumstances, the respondents would not have any jurisdiction to invoke the provisions of the Act, 1994 read with Rules, 1994 to bring the services rendered by the petitioner No. 1 to its parent Company within the purview of levy of service tax under the provisions of the Act, 1994.
Moreover, the impugned show cause notice is also not tenable in law as the same is issued invoking Section 73 of the Act,1994 for extending the period for the issuing the Notice on the ground of alleged willful mis-statement or suppression of the facts on the part of the petitioner No.1. The petitioners cannot be said to have made any willful mis-statement or suppressed any fact as the petitioners cannot be made liable for levy of service tax by wrongly treating the petitioners and its parent Company as establishment of the same Company. It is trite law that the petitioner no.1 Company, which is incorporated under the provisions of the Companies Act, 1956 and its holding Company incorporated at Germany are both distinct persons and therefore, both cannot be treated to be establishments of the same Company distinct artificial jurisdiction person.
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