Order Date – 05 April 2024

Parties: M/s Baxter India Private Limited Vs The Commissioner of Service Tax, Delhi and The Commissioner of CGST, Gurugram

Facts –

• The Appellant, M/s Baxter India Private Limited, was served with show cause notices on the ground that the appellants are not discharging service tax and certain reimbursements made to the foreign entities for the services received under Reverse Charge Mechanism.

Issue –

• Whether the appellant is liable to discharge for reimbursements made to the foreign entities for the services received under Reverse Charge Mechanism?

Order –

• The Tribunal observed that the appellant is rendering services to their overseas entities. Though, the services are performed in India, the beneficiary of the services is abroad and the payment for the same is coming to the appellants along with the reimbursed expenses; therefore, in view of the Circular No.111/05/2009-ST dated February 04, 2009, the services qualify to be export of services in view of the Export of Service Rules as the service is used outside India.
• Regarding the issue of payment of royalty, it is clear from the Agreement that it is a license to use the „Intellectual Property Rights‟ but not a “Franchise Agreement‟. We find that there is no mention of grant of Representational Right so as to fall under the category of “Franchise‟.
• Regarding the allegation of non-payment of service tax on networking charges and technical services, the Tribunal accepted the appellant contention that service tax on the Reverse Charge Mechanism is not payable prior to 18.04.2006. Regarding non-payment of service tax on reimbursement it was held that service tax is not on expenses but is on that portion of the expenses which are paid for the services received.
• Hence the appeals are allowed.