2011 (7) TMI 812 - AT - Service Tax

Import of servcies - Rule 3(iii) - As per this rule the criteria is that if such services are received by a recipient located in India for use in relation to business then it shall be considered as a taxable services provided from outside India and received in India and shall be subjected to Service Tax as per Section 66A of the Finance Act 1994 - The said services were received by a recipient located in India for use in relation to business or commerce and thus satisfy criteria of Rule 3(iii) - prima facie the duty demanded from the applicant is payable.

Summary

Issues:
1. Service Tax liability on foreign currency bond issuance services received in India.

Analysis:
The case involved a dispute regarding the Service Tax liability on services related to the issuance of foreign currency bonds received in India. The appellant engaged the Bank of New York for issuing the bonds and paid for the services rendered. The Revenue sought to impose Service Tax under Section 66A of the Finance Act, 1994, along with the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006.

The appellant argued that since the entire service was performed outside India and the bonds were issued and kept outside India, no Service Tax should be applicable in India. On the contrary, the department contended that the services fell under the category of banking and financial services as specified in the relevant rules. According to Rule 3(iii) of the Taxation of Service Rules, if services are received by a recipient in India for business use, they are considered taxable services provided from outside India and received in India, subject to Service Tax under Section 66A of the Finance Act, 1994.

After considering both arguments, the Tribunal concluded that the taxability of the service is determined based on the recipient's location and the criteria specified in Rule 3(iii) of the Rules, not the place of service performance. As the services were received by a recipient in India for business use, they satisfied the criteria of Rule 3(iii), making the duty demanded payable by the appellant. The appellant was directed to pay the tax demanded within four weeks and report compliance by a specified date.

Furthermore, the Tribunal granted a waiver on the balance of dues from the appellant for the admission of appeal, with a stay on the collection of such dues contingent upon the payment of the tax demanded. The judgment emphasized the importance of complying with tax obligations based on the recipient's location and the relevant rules governing the taxation of services provided from outside India and received in India.