2012 (8) TMI 100 - AT - Service Tax

Royalty payment to Foreign Service provider - service tax paid on being objected by Department - recovery of interest and imposition of penalty for delay in filing - Held that - As there was no liability to pay Service Tax u/s 66A as it was was enacted w.e.f. 18.4.2006 even if the Service Tax is paid, the question of recovery of interest and imposition of penalty does not arise.

Summary

Issues: Liability to pay Service Tax prior to 18.4.2006, applicability of Section 66A of the Finance Act, 1994, interpretation of judicial decisions regarding Service Tax payment by recipient of service outside India.

Liability to pay Service Tax prior to 18.4.2006:
The case involved the payment of royalty to a Foreign Service provider in 2003, with subsequent payment of Service Tax in October 2006. The Commissioner (Appeals) held that prior to 18.4.2006, there was no liability to pay Service Tax, citing the enactment of Section 66A of the Finance Act, 1994. This decision was based on the judgment of the Hon'ble High Court of Bombay in a similar case. The Tribunal referred to a CBEC letter distinguishing other judgments and upheld the decision that no Service Tax liability existed before 18.4.2006.

Applicability of Section 66A of the Finance Act, 1994:
The Revenue argued that a CBEC letter distinguished the Bombay High Court judgment, citing other cases where Service was rendered in India. However, the respondent's counsel contended that the Bombay High Court decision and other upheld judgments should be followed. The Tribunal, in line with its decision in a previous case, Bosch Rexroth (I) Ltd., held that Service Tax was not leviable before 18.4.2006. The Tribunal emphasized judicial discipline in following the previous decisions and rejected the Revenue's appeal.

Interpretation of judicial decisions regarding Service Tax payment by recipient of service outside India:
The Tribunal considered the decision in the case of Unitech India Ltd. and Bosch Rexroth (I) Ltd., along with the Hon'ble High Court of Delhi's decision. It concluded that prior to 18.4.2006, there was no liability to pay Service Tax, leading to the rejection of the Revenue's appeal. The Tribunal highlighted that when there is no liability to pay Service Tax, the question of interest recovery and penalty imposition does not arise, citing a previous case involving similar circumstances.

In summary, the judgment clarified the liability to pay Service Tax before 18.4.2006, the applicability of Section 66A of the Finance Act, 1994, and the interpretation of judicial decisions regarding Service Tax payment by recipients of services outside India. The Tribunal upheld the decision that no Service Tax liability existed before 18.4.2006, following previous judgments and emphasizing judicial discipline in maintaining consistency in such matters.