2013 (12) TMI 431 - AT - Service Tax

Stay application - Demand of service tax - Call Centre Services - Department treated the service of purchase of time and spaces lots in foreign magazines and journals published and circulated there as Business Auxiliary Service taxable - Section 65(105)(zzb) - Department held that these services had been received by the appellant from foreign service providers not having any office or establishment in India, the appellant being service recipient, were liable to pay service tax in respect of the same - Held that - for services to be treated as having been received in India from offshore service providers, in terms of the provisions of Rule 3(ii) of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 these services should have been performed in India. However, admittedly none of these services have been performed in India. Therefore, so far as these services are concerned, the same, in terms of the provisions of Rule 3(ii) of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006, the same cannot be treated as having been received in India by the appellant and we are of prima facie view that the appellant cannot be saddled with duty liability under Section 66A of the Finance Act, 1994 in respect of these services. service of purchase of space and time slots in foreign magazines and journals by the appellant, became taxable w.e.f. 1-5-2006 under Section 65(105)(zzm) and, hence, during the period prior to this, the same could not be treated as taxable. The bulk of the service tax demand is in respect of this service for the period prior to 1-5-2006, beside this, it is also doubtful as to whether the extended period under proviso to Section 73 can be invoked - Prima facie case in favour of assessee - Stay granted.

Summary

Issues:
1. Taxability of services received by the appellant from foreign service providers.
2. Service tax demand and penalties imposed on the appellant.
3. Applicability of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.
4. Whether the services were performed in India.

Analysis:
1. The appellant provided Call Centre Services to clients abroad and received various services like purchase of space in foreign magazines, training abroad, convention service, and software upgradation remotely. The department treated these services as taxable under different sections of the Finance Act, 1994. The Commissioner confirmed a service tax demand of Rs. 52,34,008 against the appellant, including penalties under Sections 77 and 78. The appellant challenged this order.

2. The appellant argued that services under Sections 65(105)(zc), 65(105)(zzc), and 65(105)(zzg) were not performed in India, thus not taxable under Rule 3(ii) of the Taxation of Services Rules, 2006. They also contended that the service of purchasing space in foreign magazines was taxable only from 1-5-2006 under Section 65(105)(zzm), making the demand for the period before that invalid. The Tribunal found merit in the appellant's arguments and waived the pre-deposit requirement, allowing a stay on recovery pending appeal.

3. The Tribunal noted that for services to be considered received in India under Rule 3(ii) of the Taxation of Services Rules, 2006, they must have been performed in India. Since none of the services in question were performed in India, the appellant could not be held liable for service tax under Section 66A of the Finance Act, 1994 for those services.

4. Regarding the service of purchasing space in foreign magazines, the Tribunal acknowledged that it became taxable only from 1-5-2006. The majority of the service tax demand pertained to this service for the period before the taxability started. Additionally, there were doubts about invoking the extended period under the proviso to Section 73. Consequently, the Tribunal granted the appellant's request for waiver from pre-deposit requirements, stayed the recovery of service tax demand, interest, and penalty, and allowed the appeal.

This detailed analysis of the judgment addresses the issues raised in the case comprehensively, highlighting the legal arguments and the Tribunal's decision on each point.