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2011 (5) TMI 542 - AT - Service TaxWaiver of pre-deposit - Scientific or Technical Consultancy Service - Service tax liability - Held that - It was only w.e.f 1.1.2005 by notification no. 36/2004-ST that the statute recognized such recipient of service to be a person liable to pay service tax. But even prior to that date the Service Tax Rules had recognized such a person as the person liable to pay service tax. The decision in the case of Hindustan Zinc Ltd. (2008 (6) TMI 6 - CESTAT-LB) held that such an Indian recipient of service rendered by a non-resident (having no office in India) from abroad did not have liability to pay service tax in respect of such service prior to 1.1.2005 - Hence in the present case the appellant is entitled to claim the benefit of the Tribunal s Larger Bench decision affirmed by the apex court 2009 (1) TMI 266 - SUPREME COURT OF INDIA - Thus no liability to pay service tax on the service in question - There will be waiver of pre-deposit and stay of recovery in respect of the dues adjudged against the appellant.
Issues:
1. Waiver of pre-deposit and stay of recovery in respect of service tax and penalties imposed on the appellant. 2. Liability of Indian recipient of service from a non-resident company for service tax prior to 1.1.2005. 3. Interpretation of the agreement terms regarding technical assistance and running royalties. 4. Applicability of the definition of "scientific or technical assistance" under section 65(92) of the Finance Act, 1994. 5. Comparison with a similar case where service tax demand was dropped by the appellate Commissioner. Issue 1: Waiver of pre-deposit and stay of recovery The appellant sought waiver of pre-deposit and stay of recovery for service tax and penalties amounting to over Rs.52 lakhs. The tax was demanded for the period from July 2002 to September 2004 under "Scientific or Technical Consultancy Service." The appellant had entered into technical assistance agreements with foreign companies for acquiring technical information and assistance for manufacturing licensed products in India, leading to the tax demand on running royalties paid to these companies. Issue 2: Liability prior to 1.1.2005 The appellant argued that as an Indian recipient of services from a foreign company without an office in India, they were not liable to pay service tax before 1.1.2005. They relied on a Tribunal decision and a Supreme Court judgment supporting this view. The taxing statute did not recognize such liability before 1.1.2005, and the Tribunal's Larger Bench decision confirmed this position. Issue 3: Interpretation of agreement terms The disagreement centered on whether the running royalties paid by the appellant to foreign companies constituted consideration for technical assistance. The respondent argued that the services provided under the agreement, including technical assistance, were taxable under "scientific or technical consultancy service" defined in the Finance Act, 1994. Issue 4: Definition of "scientific or technical assistance" The appellant contended that the activity did not meet the criteria of "scientific or technical assistance" as defined in section 65(92) of the Finance Act, 1994. They highlighted that the transfer of technical know-how is now covered under "intellectual property service," for which they had been paying service tax. Issue 5: Comparison with a similar case The appellant referenced a case where a demand for service tax for a comparable period was dropped by the appellate Commissioner. This comparison was made to support their claim for waiver of pre-deposit and recovery stay for the disputed dues. In conclusion, the Appellate Tribunal granted the appellant's request for waiver of pre-deposit and stay of recovery based on the legal position that prior to 1.1.2005, Indian recipients of services from foreign companies without offices in India were not liable to pay service tax. The Tribunal's decision was supported by a Supreme Court judgment and overruled any contractual determination of tax liability. The interpretation of the agreement terms regarding technical assistance and running royalties was crucial in determining the taxability of the services provided. The comparison with a similar case where service tax demand was dropped further strengthened the appellant's argument for relief from the tax liabilities imposed.
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