Refund Claim For Service Tax Can't Be Made On Transactions Which Took Place Beyond Territorial Jurisdiction Of India: CESTAT

The Bench of Dr. Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical) has observed that, “The said claim for refund is in respect of service tax paid by the assessee in respect of transactions that took place beyond the territorial jurisdiction of India and, therefore, that service tax was not payable.”

In this case, the assessee is engaged in providing information technology software service mainly to its clients located outside India. In about 98% cases, assessee is directly entering into contract with overseas customers for providing service.

In case of remaining 2% cases, Model-II transactions wherein the assessee provides service outside the territorial jurisdiction of India and raises invoice from the subsidiary and collects the consideration for providing the service. Assessee has paid service tax on these transactions on reverse charge basis and availed cenvat credit of the same.

The assessee filed an Appeal before Commissioner (Appeals), who denied refund of cenvat credit to the assessee. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.

The assessee contended that the onsite services provided by the overseas subsidiaries to the assessee for the Model-II transactions would amount to input service. So, the assessee has rightly availed the cenvat credit on the tax paid on such services.

Whereas it was contended by the department that those services are provided by subsidiaries, and the assessee has nothing to do with them. So, they are not input services, therefore, cenvat credit of service tax paid on the transactions does not satisfy the definition of input service.

The Tribunal noted that the said appeals are in respect of entire service tax paid by the assessee during the relevant period and that included some component of the service tax paid on the transactions that took place between the overseas subsidiaries and their overseas clients which is already held to be not admissible for payment of service tax.

The Tribunal opined that “The said Cenvat credit is Cenvat credit of service tax paid on transactions that completely took place beyond the territorial jurisdiction of India and under the provisions of Section 64 of Finance Act, 1994, service tax was not leviable on the same.”

In view of the above, the Tribunal dismissed the appeal.

Counsel for Appellant/ Assessee: Jay Chheda

Counsel for Respondent/ Department: S. Varalakshmi

Case Title: Tech Mahindra Ltd. Versus Commissioner of Service Tax-I, Pune

Case Number: Service Tax Appeal No. 86917 of 2016

Click Here To Read/Download The Order