2004 (6) TMI 6 - AT - Service Tax

Service Tax Service provider who were undisputedly non-resident and did not have any office in India Stay /Dispensation of pre- deposit of service tax

Summary

Issues:
- Demand of service tax on joint venture company for technical know-how service provided by a foreign company.
- Interpretation of Rule 6(1) of the Service Tax Rules, 1994 regarding service tax liability on service recipient in absence of liability on the foreign service provider.
- Claim for waiver of pre-deposit and stay of recovery based on the absence of fixed service tax liability on the foreign service provider.

Analysis:
1. The case involves a joint venture company facing a demand of Rs. 6,31,055/- for service tax, alleged to be payable for technical know-how service provided by a foreign company. The Revenue contends that the joint venture company is liable for the service tax on behalf of the foreign service provider. The authorities below confirmed this demand.

2. The Counsel for the joint venture company argues that as per Rule 6(1) of the Service Tax Rules, 1994 during the relevant period (1999), no service tax could be demanded from the joint venture company as the service tax liability on the foreign service provider was not established. The Counsel highlights that the department did not hold the foreign company accountable for any service tax related to the technical know-how service. Therefore, the demand on the joint venture company is legally unsustainable.

3. Upon examination, it is found that the department never fixed any service tax liability on the foreign service provider, who was a non-resident without any presence in India. Rule 6(1) allows the Revenue to demand service tax from the service recipient in India only after establishing the liability on the non-resident service provider. Since this crucial requirement was not fulfilled in this case, the joint venture company has a strong prima facie case.

4. Consequently, the Tribunal rules in favor of the joint venture company, granting a waiver of pre-deposit and stay of recovery for the penalty amount and the remaining tax balance. The decision is based on the absence of fixed service tax liability on the foreign service provider, thereby rendering the demand on the joint venture company unjustified in law.