IBM India Private Limited Vs Commissioner of Central Excise and Service Tax (CESTAT Bangalore)
The Customs, Excise and Service Tax Appellate Tribunal, Bangalore allowed two appeals challenging orders passed by the Commissioner of Central Excise and Service Tax, Bangalore, which had confirmed service tax demands against the appellant for two different periods: 2006–07 to 2010–11 and April 2013 to June 2017. The tax demands arose from amounts recorded in the appellant’s financial statements as “earnings in foreign currency,” which the department alleged represented consideration for maintenance and repair services provided during the warranty period of products sold in India.
The appellant is engaged in the sale of information technology products and related services in domestic and export markets. It imports products from overseas manufacturing entities of the IBM group or affiliated subsidiaries and sells them in India. These manufacturing entities provide warranty coverage for defects in the machines supplied to the appellant. The appellant also provides its own warranty to customers in India when selling the products.
According to the department, reimbursements received from overseas entities for warranty-related activities represented consideration for services falling under the category of “management, maintenance or repair service” under the Finance Act, 1994. The Commissioner held that the entire amount received as reimbursement from IBM Singapore was liable to service tax. The department also invoked the extended period of limitation alleging suppression of facts and imposed penalties.
