2015 (6) TMI 1034 - AT - Service Tax

Liability to pay service tax - Technical inspection and certification agency service received from abroad - Held that - there is no finding that appellants are not using the service for business or commerce. it can be said that service is partly performed in India. Since the report is received in India and the testing is done on the goods sent by the appellant. However, because of the exclusion as per Rule 3(3), prima facie, we find that service tax may not be liable to be paid. In view of the above, requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal. - Decided in favour of appellant

Summary

Issues:
- Liability to pay service tax on technical inspection and certification agency service received from abroad.
- Interpretation of Rule 3 of Taxation of Services (Provided from Outside India) Rules, 2006.
- Exclusion of services received by a recipient located in India for use in relation to business or commerce.

Analysis:
- The judgment dealt with the demand for service tax for a specific period, confirming the liability on the appellant for service tax on technical inspection and certification agency service received from abroad. The penalty was imposed based on this liability. The appellant, a manufacturer of Power Line Carrier Communication Equipment, sends line traps for testing in IEC accredited laboratories, receiving test reports in return.

- The key argument presented was regarding Rule 3 of Taxation of Services (Provided from Outside India) Rules, 2006. The counsel contended that the service falls under Clause 2 of the Rule, which stipulates that the receiver must pay tax if the service is partly performed in India and provided by a service provider located outside India. Additionally, services received by a person in India for business or commerce purposes are excluded from service tax levy under Rule 3(ii).

- The tribunal examined the submissions and highlighted Rule 3(ii) and Rule 3(iii) to understand the applicability of the rules. It was noted that in this case, there was no evidence to suggest that the appellant was not using the service for business or commerce. As the report was received in India and testing was conducted on goods sent by the appellant, indicating that the service was partly performed in India, the tribunal found that prima facie, service tax may not be applicable due to the exclusion under Rule 3(3).

- Consequently, the tribunal waived the requirement of pre-deposit and granted a stay against recovery during the appeal's pendency. The judgment emphasized the importance of considering the specific circumstances of service provision and recipient usage in determining the liability for service tax, particularly in cases involving services received for business or commerce purposes in India.