K. Anpazhakan ORDER
K. Anpazhakan, Member (T)
1. The present appeal has been filed against the impugned Order-in-Original No. 03/Commr/ST-II/Kol/2014-15 dated 16.03.2015 passed by the Commissioner of Service Tax-II, Kolkata, wherein the Ld. Commissioner has confirmed the demand of service tax of Rs.94,20,145/- along with interest and imposed equal amount of tax as penalty. He also disallowed Cenvat credit amounting to Rs.3,05,60,728/- and ordered of recovery of interest and penalty equal to the credit disallowed. Penalty has also been imposed on Section 77 of the Finance Act, 1994 and Rule 7(c) of the Service Tax Rules, 1944.
2. The appellant M/s. R.S. Software (India) Ltd. is engaged in development of software at its development centre in Kolkata. The appellant is registered with Service Tax Commissionerate, Kolkata - II, under the category of Management Maintenance or Repair Service and Business Auxiliary Service. For running their business, the appellant has set up branch offices at various countries, which are all their permanent establishments. The branch offices run as independent units with its own set of employees, clients, bank accounts, expenditure and income. Despite being separate office in its own rights in providing services, raising invoices, incurring expenditure and making payments, the Indian Law requires consolidation of accounts of all branches, irrespective of its location.
2.1. Under the backdrop of the above said facts, the department initiated an investigation against the appellant alleging that the services received by them from non-resident banks are liable to service tax under the category of Banking and other Financial Services, under reverse charge mechanism. Accordingly, it was alleged that the appellant was liable to pay service tax of Rs.94,20,154/- for the period from 01.04.2007 to 31.03.2012.
2.2. In was also alleged that during the period April 2007 to March 2012, the appellant has availed Cenvat credit amounting to Rs.3,05,57,728/-without having valid documents as prescribed under Rule 9 of Cenvat Credit Rules, 2004. Out of this credit, the appellant has utilized the credit amounting to Rs.1,10,15,903/-.
2.3. A Show Cause Notice dated 19.04.2013 was issued to the appellant demanding service tax of Rs.94,20,154/- and proposing to deny the Cenvat credit of Rs.3,05,57,728/-. The said Notice was adjudicated vide the impugned order and the demands raised in the Notice has been confirmed along with interest and penalty. Aggrieved against the confirmation of the demands, the appellant has filed this appeal.
3. The appellant submits that they are rendering services through a network of branch offices located abroad. These branch offices are permanent establishments and not mere representative offices. They provide services to their clients in their own rights, raise invoices, incur expenditure, avail bank facilities, have its own technical and human resources and operate as independent units. They do not claim any reimbursement of expenditure from the Corporate Office. Section 66A(2) of the Finance Act, 1994 clearly lays down that permanent establishments in different countries shall be treated as separate persons. Therefore, service received by the permanent establishments abroad cannot be said be considered as services received by the appellant in India, on reverse charge basis. Accordingly, th........