2012 (5) TMI 267 - AT - Service Tax

Recovery of Service Tax on royalty on Consulting Engineer services received from foreign service provider - Held that -CBE&C vide its circular F.No.276/ 8/2009-CX8A, dt.26.09.2011, has clarified that no Service Tax is liable to be paid in respect of services received from service providers abroad having no offices in India prior to 18.04.2006 - no merit in the appeal filed by the Revenue as the period involved in this case is prior to 18.04.2006 - against revenue.

Summary

Issues:
Recovery of Service Tax on royalty on Consulting Engineer services received from a foreign service provider during 2002-2005. Interpretation of circular F.No.276/8/2009-CX8A regarding liability for Service Tax on services received from service providers abroad without offices in India before 18.04.2006.

Analysis:
The judgment pertains to the recovery of Service Tax on royalty on Consulting Engineer services received by M/s Klockner Desma Machinery Pvt. Ltd. from a foreign service provider during the period 2002-2005. The original adjudicating authority dropped the Show Cause Notice, but the Commissioner initiated proceedings under Section 84 of the Finance Act, 1994. However, the proceedings were again dropped based on a Tribunal decision and other precedents. The Revenue appealed this decision, citing a challenge to a Tribunal decision in another case. The Tribunal noted that as per a circular by the CBE&C, no Service Tax is payable for services received from foreign service providers without offices in India before 18.04.2006. Considering this clarification and the precedents relied upon by the Commissioner, the Tribunal found no merit in the Revenue's appeal since the period in question predates 18.04.2006.

The judgment highlights the significance of the circular F.No.276/8/2009-CX8A, which clarifies the liability for Service Tax on services received from foreign service providers without offices in India before 18.04.2006. The Tribunal's decision was based on this circular and the precedents cited by the Commissioner in dropping the proceedings against M/s Klockner Desma Machinery Pvt. Ltd. The Tribunal's rejection of the Revenue's appeal underscores the importance of considering the relevant timelines and clarifications provided by the CBE&C in determining the applicability of Service Tax in such cases.

In conclusion, the Tribunal's decision to reject the Revenue's appeal in the case of recovery of Service Tax on royalty for Consulting Engineer services received from a foreign service provider during 2002-2005 is based on the clarification provided in circular F.No.276/8/2009-CX8A. The judgment emphasizes the need to consider the timelines and legal interpretations in such matters, as demonstrated by the Tribunal's reliance on the circular and precedents to uphold the dropping of proceedings against the appellant.