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2025 Supreme(Online)(CESTAT) 2
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
S. S. GARG, P. ANJANI KUMAR, JJ
YKK India Private Limited – Appellant
Versus
Commissioner of Central Excise, Goods & Service Tax, Rohtak – Respondent
Service Tax Appeal No. 51023 of 2014
For the Appellants/Petitioners: Mr. Kishore Kunal, Ms. Runjhun Pare
For the Respondents: Mr. Aniram Meena, Mr. Goverdhan Dass Bansal
The tribunal ruled that certain services provided to foreign entities qualify as 'export of service' under the Export of Service Rules, affirming that service tax demands were not sustainable based on established legal precedents.
Headnote:(A) Finance Act - Sections 76, 77, 78 - Export of Services - The appellant's claim that 'Business Auxiliary Services' and 'Business Support Services' provided to a foreign company qualify as 'export of service' under Export of Service Rules was analyzed and upheld based on prior tribunal and Supreme Court rulings confirming these services were used outside India and benefits accrued abroad. (Paras 4.1, 6.1, 6.2)
(B) Demand on expenses - Court noted that the demand of service tax on reimbursement of expenses incurred by the appellant's employees was not sustainable as per the precedent set by the Hon’ble Delhi High Court and affirmed by the Supreme Court. (Paras 4.3, 6.3)
(C) Cenvat Credit - Court held that prior to amendment in Cenvat Credit Rules, trading of goods couldn't be classified as a service. (Paras 4.4, 6.4)
(D) Extended period of limitation - The department failed to prove intentional suppression of facts; hence, the extended period was deemed inapplicable. (Paras 4.5, 6.5) (E) Interest and penalties - As the main demand was not sustainable, the corresponding interest and penalties were also ruled against. (Paras 6.6)
Facts of the case:
The appellant contested demands confirmed by the Commissioner of CE & ST covering service tax liabilities and cenvat credits, claiming these were incorrectly imposed without due procedure and erroneous interpretations of the relevant laws.
Findings of Court:
The demands under the impugned order were invalidated on multiple legal grounds relating to the nature of services and procedural correctness.
Issues: The core issues revolved around the classification of services as exports and the legitimacy of service tax demands.
Ratio Decidendi: The Court found that services performed correctly fell under export definitions, identifying previous legal cases as critical to their decision.
Result: Appeal allowed.
| Table of Content |
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| 1. conclusion based on findings and decision. (Para 7) |
S. S. GARG :
The present appeal is directed against impugned order dated 31.10.2013 passed by the Commissioner of CE & ST, Rohtak, whereby the learned Commissioner has disposed of two SCNs covering the period 2006-07 to 2010-11 and 2011-12 respectively and has confirmed the total demand of Rs.68,59,980/- (Rs.68,17,381/- + Rs.42,599/-) towards Service Tax and demand of Rs.13,08,503/- towards Cenvat Credit, along with interest and penalties.
2. Briefly stated facts of the present case are that the appellant M/s YKK India Private Limited is a company incorporated under the Companies Act, 1956 and is engaged in the manufacture and sale of Zippers and parts thereof in India and to neighboring countries. The appellant is registered with the Service Tax department and has obtained centralized registration under the Finance Act to meet compliance obligations.
2.1 An audit of the appellant was conducted by the department for the period April 2006-07 to 2010-11 under Rule 5A of the Service Tax Rules, 1994 during January, February and June, 2011.
2.2 Subsequently, based on the audit objections, the appellant was served two SCNs dated 17.10.2011 and 28.09.2012, covering the period 2006-07 to 2010-11 and 2011-12 respectively.
2.2.1 Vide first SCN, a demand of service tax of Rs.68,17,381/- along with interest and imposition of penalties under Sections 76 , 77 & 78 of the Finance Act , was proposed; and a recovery of Cenvat Credit amounting to Rs.13,08,503/- along with interest and imposition of penalty under Rule 15 of Cenvat Credit Rules , was also proposed in the first SCN.
2.2.2 Vide the second SCN, a demand of service tax amounting to Rs.42,599/- along with interest and imposition of penalties under Sections 76 & 77 of the Act, was proposed.
2.3 After following the due process, the learned Commissioner vide the impugned order has confirmed the following demands:
2.3.1 In respect of first SCN, the learned Commissioner has confirmed the demand of Service Tax of Rs.68,17,381/- along with interest and also imposed a penalty of Rs.5000/- under Section 77 and an equal penalty of Rs.68,17,381/- under Section 78 of the Act. The learned Commissioner also confirmed the recovery of the Cenvat Credit of Rs.13,08,503/- along with interest and imposed an equal penalty of Rs.13,08,503/- under Rule 15 of the Cenvat Credit Rules in respect of first SCN.
2.3.2 In respect of second SCN, the learned Commissioner has confirmed the demand of Service Tax of Rs.42,599/- along with interest and also imposed a penalty of Rs.100/- per day for which failure to pay service tax or 1% of tax per month whichever is higher under Section 76 and a penalty of Rs.5000/- under Section 77 of the Act.
2.4 Being aggrieved by the said order passed by the learned Commissioner, the appellant has preferred the present appeal before us.
3. Heard both the parties and perused the material on record.
4. The learned Counsel for the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law, and binding judicial precedents. The learned Counsel further submits that in the present case, there are four issues under which demands have been raised, which are as follows:
(i) Whether “Business Auxiliary Services” provided by the appellant to foreign located company qualify as ‘export of service’ under Rule 3 of Export of Service Rules, 2005?
(ii) Whether “Business Support Services” provided to foreign located company qualify as ‘export of service’ under Rule 3 of Export of Service Rules, 2005?
(iii) Service Tax liability on reimbursement of expenses incurred on behalf of group companies.
(iv) Cenvat Credit eligibility on input services used in trading of goods.
4.1 As regards the Issue No.(i), whether “Business Auxiliary Services” provided by the appellant to foreign based company qualify as ‘export of service’ under Rule 3 of Export of Service Rules
