2013 (7) TMI 68 - AT - Service Tax

Import of services Section 66A consulting engineers services - Demand of Service tax - Whether the demand of service tax for the period from March 2003 to March 2005 is valid - Held that the respondent is not liable to pay service tax as rendering the services before the enactment of Section 66A is not covered - as decided in Indian National Ship owners Association vs. UOI (2008 (12) TMI 41 - HIGH COURT OF BOMBAY) Decided in favor of assessee.

Summary

Issues:
Service Tax liability on consulting engineer services received from foreign companies prior to the enactment of Section 66(A) of the Finance Act, 1994.

Analysis:
The appeal was filed by M/s Narmada Chematur Petrochemicals Ltd. against an Order-in-Appeal confirming a Service Tax demand for consulting engineer services received from foreign companies during March 2003 to March 2005. The appellant failed to obtain Service Tax registration and did not pay the tax on the services received. The issue revolved around the liability of the recipient in India to pay Service Tax for services provided by foreign entities in the absence of an office in India, as per the Service Tax Rules. The show cause notice proposed recovery of Rs.2,65,158/- along with interest and penalties. The Order-in-Original confirmed the Service Tax amount and imposed penalties. The Commissioner, Central Excise (Appeals) reduced the demand but upheld the interest and penalties. The appellant challenged this order.

The Tribunal noted that the demand was confirmed for services provided by foreign companies before the enactment of Section 66(A) of the Finance Act, 1994. Referring to a decision of the Hon'ble High Court of Mumbai in a similar case, it was established that the recipient in India is liable to pay Service Tax for services received from abroad only after 18.04.2006, post the enactment of Section 66(A). Since the demand in the present case pertained to the period prior to this enactment, the Tribunal held that Service Tax was not payable by the recipient before 18.04.2006. Consequently, the Order-in-Appeal was set aside, and the appeal filed by the appellant was allowed.

This judgment provides clarity on the liability of recipients in India to pay Service Tax for consulting engineer services received from foreign companies before the enactment of Section 66(A) of the Finance Act, 1994. It emphasizes the significance of the timeline in determining the tax liability and highlights the legal precedent set by the Hon'ble High Court of Mumbai in similar cases. The decision underscores the importance of aligning tax liabilities with the relevant legislative provisions in force during the period in question, ensuring a fair and legally sound adjudication process in matters of Service Tax disputes involving cross-border transactions.