2011 (2) TMI 855 - AT - Service Tax

Service tax liability - Provision of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 - Appellants submits that admittedly the period involved in this case is 2003 to 2005 and as held by the Hon ble High Court of Bombay in the case of Indian National Shipowners Association v. Union of India 2008 -TMI - 32013 - HIGH COURT OF BOMBAY , service tax is not leviable under Rule 2(1)(d)(iv) on the petitioner prior to 18-4-2006 - find that the appellants are not liable to pay service tax on the services received by them from the foreign supplier during the impugned period - Accordingly, impugned order is set aside.

Summary

Issues:
Service tax demand on payment made to foreign consultants for the period 2003 to 2005.

Analysis:

Issue 1: Service Tax Liability on Payment to Foreign Consultants

The appellants were facing a service tax demand for the payment made to foreign consultants between 2003 to 2005. The case revolved around the interpretation of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, which states that a person receiving taxable services in India from a non-resident or a person from outside India without an office in India is liable to pay service tax on such payments. The appellants had paid a significant amount in foreign currency to a foreign consultant for trademark and patent registration during the mentioned period.

Analysis: The Tribunal examined the legal position based on the decision of the Hon'ble Bombay High Court in the case of Indian National Shipowners Association, which was upheld by the Hon'ble Apex Court. The key finding was that service tax was not leviable on the petitioner prior to 18-4-2006 under Rule 2(1)(d)(iv). Since the appellants had received services from a foreign supplier and made payments in foreign currency between 2003 to 2005, they were not liable to pay service tax as per the legal precedent set by the aforementioned judgments. Therefore, the Tribunal set aside the service tax demand against the appellants and allowed the appeal with consequential relief.

Conclusion: The Tribunal ruled in favor of the appellants, stating that they were not liable to pay service tax on the payments made to foreign consultants for the services received during the period in question, based on the legal interpretation derived from the judgments of the Hon'ble Bombay High Court and the Hon'ble Apex Court.