2010 (10) TMI 397 - Commissioner - Service Tax

Demand - Technical Testing and Analysis Service - Rule 3(ii) of the Taxation of Services - Notification No. 6/2008-S.T., dated 1-3-2008 - SCN and in the impugned order, it is observed that the entire service is done/provided at Houstan, Texas i.e. outside India, the said service is not taxable under the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, during the relevant period - As the said service is not taxable during the relevant period, there is no question of imposition of any penalty on the appellant - Decided in the favour of the assessee

Summary

Issues:
1. Taxability of Technical Testing and Analysis Service provided from outside India and received in India.
2. Applicability of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.
3. Interpretation of Rule 3(ii) of the Taxation of Services Rules.
4. Effect of Notification No. 6/2008 dated 1-3-2008 on the tax liability.
5. Imposition of penalty and levy of interest.

Analysis:
The appeal was filed against an Order-in-Original confirming demand of service tax for Technical Testing and Analysis Service provided from outside India and received in India. The appellant contested the taxability of the service based on the scope of the allegation in the Show Cause Notice (SCN) and the subsequent order. The appellant argued that the service was taxable under Section 66A of the Finance Act, 1994, read with Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, not Rule 3(ii) of the Taxation of Services Rules. The appellant also highlighted that the service was entirely performed outside India during the relevant period, making it non-taxable under the rules applicable at that time.

The adjudicating authority relied on an amendment effective from 1-3-2008, stating that if services are provided through electronic means in relation to goods in India, they are taxable. However, the appellant argued that the services were provided before this amendment and were not related to goods in India. The appellant emphasized that the services were not taxable during the relevant period as they were entirely performed outside India. The appellant further contended that the dispute was revenue-neutral, citing a Supreme Court ruling, and hence, no penalty should be imposed.

After considering the facts, records, and relevant laws, the Commissioner found that the service in question fell under Technical Testing and Analysis, provided entirely outside India. The Commissioner analyzed Rule 3(ii) of the Taxation of Services Rules and the subsequent amendment of 2008, concluding that the amendment did not apply to services provided before its effective date. Therefore, the service was not taxable during the relevant period, leading to the allowance of the appeal by the appellant.

In light of the above analysis, the Commissioner ruled in favor of the appellant, holding that the Technical Testing and Analysis Service provided from outside India and received in India during the relevant period was not taxable. Consequently, the imposition of any penalty on the appellant was deemed unnecessary due to the non-taxable nature of the service.