RCM Service Tax Refund Allowed Despite Registration Status | CESTAT

Case Details: Lehman Brothers Advisers Pvt. Ltd. vs. Commissioner of Service Tax-I, Mumbai (2025) 36 Centax 207 (Tri.-Bom) 

Judiciary and Counsel Details

• S.K. Mohanty, Member (J)
• M.M. Parthiban, Member (T)
• Shri Bharat Raichandani, Advocate, for the Appellant.
• Shri Shashank Kumar Yadav, Authorized Representative, for the Respondent.

Facts of the Case

The appellant-assessee had shut down its business and was undergoing liquidation or bankruptcy proceedings, during which it received Management and Business Consultancy services and Legal Consultancy services from service providers located outside India for the purpose of winding up its business. Service Tax was paid under the reverse charge mechanism on such services and a refund was claimed on the ground that Service Tax was not payable since the services were not received for use in or in relation to business in India. The Department denied the refund on the basis that the assessee was a going concern as the Service Tax registration certificate had neither been surrendered nor cancelled. The appellant-assessee contended that, under Section 66A of the Finance Act, 1994 read with Rule 3(1)(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, Service Tax under reverse charge is payable only when services are received for use in or in relation to business in India, which condition was not satisfied as the services were received solely for winding up of business. The matter was accordingly placed before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

CESTAT Held

The CESTAT held that, in terms of Section 66A of the Finance Act, 1994 read with Rule 3(1)(iii) of the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, liability to pay Service Tax under reverse charge arises only when services are received for use in or in relation to business in India. It was held that where services were received for the purpose of winding up of business after business activities had been shut down, such services could not be treated as received in relation to business. The Tribunal further held that non-surrender or non-cancellation of the registration certificate could not be the sole basis to treat the assessee as a going concern. Accordingly, the Tribunal held that the refund claim could not have been rejected and allowed the appeals in favour of the assessee.

List of Cases Cited

• Lehman Brothers Securities (P) Ltd. v. Commissioner — 2022 (63) G.S.T.L. 103 (Tri.-Bom) — Referred [Para 5]