In Service Tax Appeal No. 89858 of 2018 -CESTAT- CESTAT (Mumbai) rules Star India not liable for Service Tax for services received by merged foreign companies
Members S.K. Mohanty (Judicial) & M.M. Parthiban (Technical) [08-06-2023]

Read Order: Star India Pvt. Ltd., Mumbai v. Commissioner of GST & Central Excise Mumbai Central, Mumbai

Chahat Varma

New Delhi, June 13, 2023: The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that the foreign companies, Star Asia Region FZ LLC, Star Asian Movies Limited, and Star Television Entertainment Ltd., remained separate entities from Star India Pvt. Ltd. (appellant) even after their merger in India. The Tribunal held that the appellant was not liable for payment of service tax under section 66A of the Finance Act, 1994, for services received by the foreign companies that were being merged with the appellant.

In the matter at hand, the Department claimed that the services provided by the international associate enterprises were received by the appellant's merged companies with a fixed establishment or usual place of residence in India. Consequently, the Department initiated show cause notice proceedings, demanding service tax along with interest and proposing penalties under the relevant sections of the Finance Act, 1994. The Commissioner confirmed the adjudged demands besides imposition of equal amount of penalty under section 78 and penalty of Rs. 5000/- for non-filing of return under section 77 of the Finance Act, 1994.

The two-judge bench of S.K. Mohanty (Judicial) and M.M. Parthiban (Technical) observed that any foreign branch or foreign agency or overseas permanent establishment of the service recipient in India was excluded from the charge of service tax under the provisions of Section 66A.

The bench further referred to the Co-ordinate bench decision in the case of Star India Private Limited Vs. Commissioner of Service Tax [LQ/CESTAT/2022/800], wherein the Tribunal had already decided the issue covering the earlier period for the very same appellant. The Tribunal had held, “for leviability of service tax, there should be a service provider and a service receiver. No one renders service oneself, as such, there can be no question of leviability of service tax…..the consequence of deemed amalgamation from 1st April 2009 would be to deem the foreign companies as overseas offices of the appellant. Section 66A (2) of Finance Act, 1994 and the Explanation therein make it abundantly clear that, for the purposes of the levy thereof, such units are to be considered as independent.”

The bench stated that the order of the Commissioner, which concluded that the services were received by the appellant due to the merger of the three foreign companies with the appellant, and that these services were taxable under Rule 3(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, was legally unsustainable.

Based on the discussions, the bench decided to set aside the order of the Commissioner of CGST & Central Excise, Mumbai Central, Mumbai, which confirmed the demands made against the appellant.