2012 (9) TMI 270 - AT - Service Tax

Provisional assessment under service tax - Management, Maintenance & Repairs Service - recipient/importer of services from the service provider located outside India - most of the services were done outside India, part of the services were rendered in India According to the appellant it was not possible to determine the exact value of taxable service performed in India and accordingly the appellant had requested for provisional assessment and payment of service tax on provisional basis - Held that - Appellate authority should not have, without putting the appellant to notice, pass an order directing the appellant to discharge the service tax liability on the entire amount indicated in the relevant contract without taking into account and giving a finding with respect to how much service has been rendered in India and what is the value of such service and what is the consideration for such service - matter remanded to the original adjudicating authority to consider the request of the appellant for provisional assessment in terms of Rule 6(4) of the Service Tax Rules, 1994 - appeals are allowed by way of remand

Summary

Issues:
- Provisional assessment of service tax on services rendered both in India and outside India.
- Determination of taxable value of services rendered in India for the purpose of service tax liability.
- Correct application of Rule 6(4) of the Service Tax Rules, 1994 for provisional assessment.

Analysis:

1. Provisional Assessment of Service Tax:
The appellant, a company providing Air Charter services, entered into an agreement with a service provider from the USA for maintenance services. The appellant contended that service tax was not payable on services rendered outside India and requested provisional assessment based on the value of services performed in India. The lower appellate authority allowed provisional assessment but directed the appellant to pay differential service tax on the total amount, disregarding the specific value of services rendered in India. The Tribunal held that the lower authority erred by not considering the actual value of taxable services provided in India for determining the service tax liability. The matter was remitted to the original adjudicating authority for proper consideration of the appellant's request for provisional assessment under Rule 6(4) of the Service Tax Rules, 1994.

2. Determination of Taxable Value for Service Tax Liability:
The Revenue argued that when a taxable service is partly performed in India, the entire service should be treated as performed in India for determining the taxable value. The appellant contended that only the value of services rendered in India should be subject to service tax. The Tribunal observed that the lower appellate authority failed to assess the specific value of services performed in India, leading to an incorrect direction for payment of service tax on the total contract amount. The Tribunal emphasized the need to determine the proportionate value of services rendered in India to ascertain the correct service tax liability.

3. Correct Application of Rule 6(4) for Provisional Assessment:
The Tribunal clarified that the lower appellate authority should have allowed provisional assessment under Rule 6(4) of the Service Tax Rules, 1994, considering the appellant's inability to determine the exact taxable amount at the time of payment. However, the authority erred in directing the appellant to pay service tax on the entire contract value without assessing the specific value of services provided in India. The Tribunal emphasized the importance of a proper assessment based on the actual taxable services rendered in India and instructed the adjudicating authority to reevaluate the provisional assessment request in line with the appellant's contentions.

In conclusion, the Tribunal allowed the appeals by remanding the matter for a correct assessment of the service tax liability based on the value of services rendered in India, ensuring a fair and accurate application of the provisions of Rule 6(4) of the Service Tax Rules, 1994.