Lehman Brothers Advisers Pvt. Ltd. Vs Commissioner of Service Tax (CESTAT Mumbai)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Mumbai has ruled in favour of Lehman Brothers Advisers Pvt. Ltd. in its appeal against the rejection of service tax refund claims. The dispute arose when the company, which had entered liquidation following the global collapse of Lehman Brothers in 2008, procured management and legal consultancy services for the purpose of winding up its Indian operations. The company discharged service tax under the Reverse Charge Mechanism (RCM) in line with Section 66A of the Finance Act, 1994. Later, it sought a refund under Section 11B of the Central Excise Act, 1944, contending that the services were not used in relation to any business activity, but solely for winding-up. Authorities, however, rejected the claim on the ground that the company had not surrendered its service tax registration and hence continued to be a “going concern.”
On examining the records, the Tribunal noted that Lehman Brothers Holdings Inc., the US parent, had filed for bankruptcy in September 2008, and the Indian entity also initiated liquidation proceedings before the NCLAT in October 2008. The services in question were acquired only for facilitating closure. Referring to Rule 3(1)(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, CESTAT held that tax liability under RCM arises only when services are received for use “in or in relation to business in India.” Since Lehman Brothers’ Indian operations had ceased and no business activity was being undertaken, the Tribunal found no basis for imposing service tax on winding-up related services.
