2011 (4) TMI 655 - AT - Service Tax

Service tax liability - find that admittedly the service tax is sought to be recovered on the services received from a foreign company on the ground that the foreign company has no office in India and as such, the liability to pay service rests with the service recipient - The period involved in the present appeal is from 1.4.03 to 31.3.03 - The Hon ble Bombay High Court in the case of Indian National Shipowners Association Vs Union of India (2008 -TMI - 32013 - HIGH COURT OF BOMBAY) held that before the enactment of Section 66A w.e.f. 18.4.2006, the recipient of service from a foreign company cannot be held to be liable to service tax - Admittedly, the period in the present appeal is prior to 18.4.2006 - Decided in favour of assessee.

Summary

Issues:
1. Taxability of services received from foreign companies under 'Consulting Engineer' category.
2. Liability of service tax on the recipient for services received from a foreign company without an office in India.

Analysis:
1. The case involves a dispute regarding the taxability of services received by the respondent from foreign companies under the 'Consulting Engineer' category. The Revenue sought to tax the services based on agreements for technical assistance and information for manufacturing products. A show cause notice was issued raising demands for service tax, interest, and penalties under the Service Tax Rules, 1944. The Adjudicating Authority confirmed the service tax, interest, and penalties, which was appealed against by the respondent. The Commissioner (Appeals) held that the services can be considered as falling under 'Consulting Engineer' services but set aside the order on the basis that the payment of royalty cannot be considered as payment towards services by a consulting engineer. The Appellate Tribunal noted the absence of the foreign companies' offices in India and cited a Bombay High Court decision that prior to 18.4.2006, recipients of services from foreign companies cannot be held liable for service tax. Therefore, the Tribunal rejected the appeal by the Revenue on this ground.

2. The second issue concerns the liability of service tax on the recipient for services received from a foreign company without an office in India. The Tribunal considered the period of the appeal from 1.4.2003 to 31.3.2003 and applied the Bombay High Court decision that prior to 18.4.2006, service tax liability does not rest upon the recipient for services from a foreign company. As the foreign companies in question did not have offices in India, the Tribunal held that no service tax liability could be imposed on the respondent for the period in question. Consequently, the appeal filed by the Revenue was rejected based on this specific issue.

In conclusion, the Appellate Tribunal, Delhi, in this judgment, addressed the taxability of services received from foreign companies under the 'Consulting Engineer' category and the liability of service tax on the recipient for services from a foreign company without an office in India. The decision was based on the interpretation of relevant legal provisions and a precedent set by the Bombay High Court regarding the period before 18.4.2006. The Tribunal ruled in favor of the respondent, rejecting the appeal filed by the Revenue on the grounds of no service tax liability resting upon the recipient for the services received during the specified period.