Fact: M/s. Jaypee Infra Venture (“the assessee”), entered into an agreement with Jaiprakash Associated Ltd (JAL) for providing consulting Engineering services in the field of preparation, planning, design and engineering works with respect to Hydro-electric Project in the State of J&K against a consideration of Rs. 22.50 crores. The assessee, realizing that they have rendered the service in the state of J&K which is outside the taxable territory, filed refund claim u/s 11B of Central Excise Act, 1944 for service tax paid in lieu of rendering of ‘consulting engineering services’ for period July 01, 2012 to March 31, 2012. Referring to Rule 8 of Place of Provision of Service Rules, 2012 (“POPS Rules”), the Assistant Commissioner rejected refund application stating that assessee as well as JAL are located in taxable territory.
Assessee’s Contention of Law: Assessee contended that Rule 3 and Rule 5 of the Place of Provision of Service Rules, 2012 have miserably been ignored and the adjudicating authority below is alleged to have committed an error while jumping upon Rule 8 thereof. Further, as per Finance Act, 1994 applicability of Service Tax laws extends to whole of India except, the State of J&K. In addition, there has been CBEC Education Guide published by Ministry of Finance to be effective from 01.07.2012 vide which the location of immovable property is a criteria to determine the taxable territory. Therefore, assessee contended that Branch Office of JAL is in State of J&K, the project which was designed and constructed for which the consultancy service was given by the assessee lies in the State of J&K which is not part of the taxable territory of India.
Held : The Hon’ble CESTAT in the case of M/s Jaypee Infra Venture Vs. CST, Delhi-III held that as per section 65(32) i.e. Taxable territory and Section 65(45) i.e. Service of Finance Act, 1994 which it makes clear that JAL, the Headquarter in Lucknow and JAL, the Branch Office in the State of J&K are establishments of two distinct persons. Further, the refund is allowed for service tax paid by assessee in respect of consulting engineer service rendered for Hydro-electric project in State of J&K despite fact that both provider and recipient of service are based in taxable territory as per section 65(32) of the Finance Act, 1994.
Thereafter, referring to Rule 5 of Place of Provision of Service Rules, 2012 (POPS Rules), remarks that, since services are for erection of immovable property in State of J&K, place of provision of service according to this Rule has to be State of J&K. Further, the authority was not liable to charge the service tax qua the said provision of service as it was deposited by the appellant without having this understanding, the appellant is very much liable to get refund thereof.
Citation: TS-691-CESTAT-2018(DEL)-ST