Revenue's Approach of Running with the Hounds and Hunting with Hares is not Either Logical or Legal: CESTAT

Revenue's Approach of Running with the Hounds and Hunting with Hares is not Either Logical or Legal: CESTAT In this matter refund of the Appellant was denied by First Appellant Authorities who claimed that the same is being nothing more than the internal transfer of funds. Shri S K Hatangadi, Assistant Commissioner (AR) representing Commissioner of CGST & Service Tax claims that the ‘consideration’ pursuant to a contractual obligation with Foreign Entity for rendering services outside the ‘taxable territory’ should be relieved of the tax component in accordance with rule 5 of CENVAT Credit Rules, 2004. On this the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) said that, it is ironic that a tax administration, otherwise keen to perceive ‘service’ in any contractual obligation involving financial flows, contends ‘no service, no consideration’ in the present dispute to deflect eligibility for a refund; a clear instance of, and because it is a revenue administration that does not bind itself to consistent approach, ‘running with the hounds and hunting with hares’ that does not appeal either logically or legally. The lower authorities have not identified the terminal entities that the appellant is purported ‘intermediary’ for, the manner in which the ‘intermediary’ service is recompensed in the channelizing of ‘consideration’ from the customer to the supplier or the origin of the supply of service in the course of which the ‘intermediary’ facilitation by the appellant occurs. The adjunct proposition of ‘no service’ to obfuscate this lacuna brings the contradiction to the fore – the determination of ‘intermediary’ is founded upon the obligations in a contract which should not only have been redundant but also not acknowledgeable as a contract if the proposition that the compensation terms therein, not being ‘consideration’ in the absence of ‘service’, are an internal arrangement for reimbursement of expenses is also accepted. Logic and legality are obviously invisible in the conclusions of the lower authorities. The nature of the service is irrelevant for the purpose of rule 5. All that is required in compliance with the conditions laid down therein which, inter alia, include the undertaking of exports as specified in rule 6A of Service Tax Rules. As pointed out by Learned Counsel, all the conditions therein had been complied with; any counters thereto in the impugned order are, for the reasons supra, without the authority of law. Therefore, the denial of the refund is not within the authority of the law. The appellant, as a provider of ‘service’ outside the ‘taxable territory’, is entitled to be relieved of the tax burden in the value of ‘service’ so exported. To Read Judgment Download PDF Given Below: