Customs, Excise and Service Tax Appellate Tribunal

Indian Additives Ltd. vs. Commissioner of GST & Central Excise

MANU/CC/0224/2024

02.07.2024

Service Tax

Service tax is not payable on the TDS paid by the Appellant on behalf of the foreign service provider

The Appellant are service providers under the category of Intellectual Property Right Service, Scientific and Technical Consultancy Service etc. and were discharging service tax. They entered into an agreement with Chevron Oronite Company LLC, USA and were paying royalty to the foreign company on the net sales of their products. During the scrutiny of details furnished by the appellant regarding the TDS portion of the royalty payment made for the period April 2010 to September 2010 and October 2011 to March 2012, it revealed that while paying service tax on the royalty payments made to the foreign company, the Appellant had not paid service tax on TDS portion of the royalty amount retained by them.

As it appeared to the department that TDS portion retained by them was also taxable, Show Cause Notices were issued for recovery of the dues. After due process of law, the original authority confirmed the demand proposed in the Show Cause Notices along with interest and also imposed penalties. Aggrieved against the said order, the Appellant preferred appeals before the Commissioner (Appeals) who vide the order impugned herein has rejected the appeals.

Prima facie there does not appear to be a bar on tax being a part of assessable value. The TDS paid/ deposited to the government exchequer by the appellant arises out of a statutory liability. In the normal course, TDS cannot be held to be a 'consideration' for the service unless specifically mandated/ deemed by law. The amount would not be part of the consideration for the taxable services received by them as per Section 67(1)(a) of the Finance Act, 1994 in the absence of the legislature itself sanctioning such a provision, mandating double taxation, in the Act. Accordingly, service tax is not payable on the TDS paid by the appellant on behalf of the foreign service provider.

The issue is no longer 'res integra' as it has already been decided by the Tribunal in the appellants own case and in the case of Adani Bunkering Pvt. Ltd. Vs. CCE, wherein the Tribunal has held that TDS deposited to the Income Tax Department in relation to the payment made to the foreign service provider over and above the invoice value of the services, is not liable to service tax.

The appellant is not liable to pay service tax on the TDS paid by them on behalf of the foreign service provider. Accordingly, the demand confirmed in the impugned order is not sustainable. The impugned order is set aside. Appeal allowed.

Tags : Demand Confirmation Legality

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