2011 (8) TMI 526 - AT - Service Tax

Foreign currency collected by the assessee from a foreign company as consideration for Advertising Agency service rendered - whether the service in question was actually exported from India - held that - . It is pointed out that the Audit Report was based on the relevant bills /invoices and that the show-cause notice was based on the said report. In this scenario, according to the learned counsel, a reasonable opportunity is liable to be given to the assessee to plead and establish the fact that the service in question had been exported from India during the material period. We are of the view that, for the ends of justice, a reasonable opportunity for this purpose should be afforded to the appellant. - appeal allowed by way of remand. Notification no. 21/2003 - retrospective effect - held that - Notification No.21/2003-ST was issued as an independent Notification granting the benefit of exemption from payment of Service Tax on taxable services for which consideration was received in convertible foreign exchange. It had nothing to do with the rescission of Notification No. 6/1999-ST ibid. No material has been placed on record to show that, during the interregnum between the rescission of Notification 6/1999-ST and the issue of Notification 21/2003-ST, the Central Government came out with any clarification disclosing a consistent policy in favour of providers of such taxable services. In the result, the above issue is held against the appellant.

Issues:
Challenge against demand of Service Tax and penalty for the period from 01.03.2003 to 19.11.2003; Interpretation of Notifications No. 2/2003-ST, No. 6/1999-ST, and No. 21/2003-ST regarding exemption from Service Tax on taxable services received in convertible foreign exchange; Allegation of non-payment of Service Tax on foreign currency collected for Advertising Agency service; Claim of exemption based on Notification No. 21/2003-ST and Circular No. 56/5/2003-ST; Assertion of service being exported from India; Plea of time-bar against the demand.

Detailed Analysis:

1. The appellant challenged a demand of Service Tax and penalty for a specific period related to foreign currency collected for Advertising Agency services. The dispute arose between Notifications No. 2/2003-ST, No. 6/1999-ST, and No. 21/2003-ST, which impacted the exemption from Service Tax on taxable services received in convertible foreign exchange. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the present challenge before the appellate authority.

2. The dispute revolved around the interpretation of the aforementioned notifications and the applicability of Service Tax on foreign currency collected for services provided. The appellant claimed exemption under Notification No. 21/2003-ST, arguing it was retrospective and clarificatory. However, the authorities found no evidence that the service was provided outside India or exported, rejecting the exemption claim. The appellant also raised the issue of time-bar against the demand, highlighting the delay in issuing the show-cause notice.

3. The appellant's counsel made two main arguments: first, the restoration of exemption under Notification No. 21/2003-ST should be considered retrospective based on legal precedents, and second, the service was exported from India, thus not subject to Service Tax. The counsel cited relevant case law and circulars to support these contentions, emphasizing the need for a time-bar defense due to the delayed issuance of the show-cause notice.

4. The appellate authority heard arguments from both sides, with the JCDR reiterating the findings of the lower authorities regarding the demand and exemption claim. However, the appellate authority identified gaps in the factual findings regarding whether the service was actually exported from India and the consideration of the time-bar defense.

5. After a thorough review, the appellate authority decided to remand the case to the original authority for further examination. The appellant was granted the opportunity to provide evidence supporting the claim of exporting the service and to address the plea of limitation properly. The authority also clarified the retrospective effect of Notification No. 21/2003-ST, ruling against the appellant's argument based on legal precedent and lack of consistent government policy.

6. In conclusion, the appeal was allowed for remand, emphasizing the need for a fresh decision on all remaining issues by the original authority, ensuring adherence to legal principles and natural justice, and granting the appellant a fair opportunity to present their case.

This detailed analysis covers the issues involved in the legal judgment comprehensively, addressing the key arguments, interpretations of relevant notifications, exemption claims, and the decision to remand the case for further examination.

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