2013 (10) TMI 690 - AT - Service Tax

Levy of service tax on import of services - date of import or date of payment - Services of technical know-how from parent company - Held that - prima facie of the view that tax liability should be decided with reference to date of receiving service rather than date of payment of consideration. In this case, service was received prior to 18.4.06 though payment was made after 18.4.06 Therefore, liability would not arise prima facie. So we grant waiver of pre-deposit of dues arising from the impugned order for admission of appeal. There shall be stay on collection of dues during pendency of the appeal - stay granted.

Summary

Issues:
1. Whether service tax liability should be determined based on the date of receiving service or the date of payment of consideration.
2. Applicability of section 66A of the Finance Act, 1994 in relation to services received prior to 18.4.06 but paid after that date.

Issue 1: Tax Liability Determination

The case involved the receipt of technical know-how services from a parent company during 2004-05 and 2005-06, with payments recorded in the books during those years but actually made after 18.4.06. The Revenue contended that service tax should apply based on the payment date due to the introduction of section 66A. The applicant argued, citing a Mumbai High Court case, that tax liability should be determined based on the date of receiving service, not payment date. The Tribunal agreed, stating that the date of service receipt is crucial for tax liability determination, not the payment date. Consequently, the Tribunal granted a waiver of pre-deposit of dues and imposed a stay on collection during the appeal.

Issue 2: Applicability of Section 66A

The Revenue argued that tax liability should be based on the payment date, emphasizing that the services were received before 18.4.06. However, the Tribunal, considering the arguments from both sides, held that tax liability should be determined with reference to the date of service receipt, not the payment date. As the service was received before 18.4.06 but paid after that date, the Tribunal found no prima facie liability. Therefore, the Tribunal granted a waiver of pre-deposit and ordered a stay on the collection of dues during the appeal process.

This judgment clarifies the importance of the date of service receipt in determining tax liability, particularly in cases where services were received before a specific legislative change but payment was made after the effective date. The decision emphasizes the significance of legal provisions and precedent in interpreting tax laws and highlights the need for a thorough analysis of the timeline of service receipt and payment to ascertain tax obligations accurately.