2011 (1) TMI 1066 - AT - Service Tax

Waiver of pre-deposit and stay of recovery - management consultancy service - secondment charges paid in foreign currency as consideration for management consultancy service was not disclosed to the department - appellant has submitted that, even if it be assumed that a taxable service was provided by M/s. British Gas to MGL, any amount of service tax could not be demanded from MGL for the period of dispute inasmuch as this period is prior to 18-4-2006, the date on which Section 66A was inserted also an Indian recipient of a taxable service provided by a non-resident person having no office in India cannot be deemed to be a service provider for purposes of payment of service tax for any period prior to 18-4-2006 - Held that - Appellant has only a debatable case and has not established a foolproof case for complete waiver of pre-deposit , appellant has to make pre-deposit of a reasonable part of the amount of service tax for purposes of Section 35F of the Central Excise Act

Summary

Issues:
1. Appellant seeks waiver of pre-deposit and stay of recovery for service tax amount and penalties imposed.
2. Interpretation of liability for service tax on payments made to a non-resident entity.
3. Application of Section 66A of the Finance Act, 1994 for service tax liability.
4. Analysis of conflicting decisions regarding service tax liability for Indian recipients of services from abroad.
5. Determination of pre-deposit amount by the Tribunal.

Issue 1:
The appellant sought waiver of pre-deposit and stay of recovery for service tax and penalties. The dispute arose from a show-cause notice demanding service tax on payments made to a non-resident entity. The Commissioner confirmed the tax demand and penalties, citing statutory provisions and previous Tribunal decisions. The appellant contested the proposals, leading to the present appeal and stay application.

Issue 2:
The crux of the dispute was whether the appellant, as a recipient of services from a non-resident entity, was liable to pay service tax. The appellant argued that prior to 18-4-2006, there was no charging provision for such liability. The appellant relied on various decisions supporting the view that Indian recipients were not liable for service tax before the enactment of Section 66A in 2006.

Issue 3:
The Tribunal analyzed the application of Section 66A of the Finance Act, 1994, which introduced liability for service tax on services provided by non-residents without offices in India. The Tribunal noted that this provision came into effect only on 18-4-2006, implying that prior to this date, the appellant could not be held liable for service tax as a recipient of such services.

Issue 4:
The Tribunal considered conflicting decisions on service tax liability for Indian recipients of services from abroad. While some decisions favored the appellant's stance, others supported the Revenue's position. The Tribunal highlighted the significance of Section 66A and the timing of its enactment in determining the liability of Indian recipients for service tax.

Issue 5:
After thorough deliberation, the Tribunal concluded that the appellant had a debatable case and had not established a foolproof argument for complete waiver of pre-deposit. Considering all aspects, the Tribunal ordered the appellant to make a pre-deposit of Rs. 5,00,000 within four weeks as a reasonable part of the service tax amount, in compliance with Section 35F of the Central Excise Act.

This detailed analysis of the judgment showcases the legal complexities surrounding the interpretation of service tax liability for Indian recipients of services from non-resident entities and the application of relevant statutory provisions and precedents in reaching a decision on pre-deposit requirements.