2013 (12) TMI 858 - AT - Service Tax

Stay application - Reverse charge - Section 66A - Bar by limitation - Held that - prima facie, the demand of tax under second show-cause notice is within the period of limitation - there is change of legislation from time to time - Prima facie case not in favour of assessee - Stay granted partly.

Summary

Issues:
Waiver of pre-deposit of tax for specific periods, liability under reverse charge basis, legislative changes affecting tax liability, limitation period for tax demand.

Analysis:
The applicants sought waiver of pre-deposit of tax totaling Rs. 20,68,133/- for 2006-2008 and Rs. 14,18,175/- for 2008-09, along with interest and penalty. They were registered for various services including "Management, Maintenance or Repair Service", "Consulting Engineer Service", and Commercial Coaching and Training Service. The issue revolved around the tax liability arising from agreements with overseas customers for software maintenance services. The applicants, as recipients in India, were deemed liable to pay tax on a reverse charge basis under Section 66A of the Finance Act, 1994. The legislative changes in the definition of services impacted the tax liability, with inclusions of "Computer Software" and "Information Technology Software" affecting the scope of taxable services provided from outside India and received in India.

The consultant argued for setting aside the tax demand on merit and limitation grounds, highlighting the legislative amendments and notifications impacting the taxability of services provided through the internet by foreign companies. The authorized representative, however, supported the Commissioner's findings, emphasizing the tax liability on Computer Software introduced by the Finance Act, 2007. The Tribunal acknowledged the prima facie validity of the tax demand under the second show-cause notice within the limitation period. Recognizing the evolving legislative framework, the Tribunal directed the applicant to deposit Rs. 15 lakhs within four weeks, with the balance dues waived and recovery stayed during the appeal process. The Tribunal scheduled a compliance report for a specified date to monitor the deposit and appeal progress. The judgment underscored the need to delve deeper into the legislative changes during the appeal hearing to assess the tax liability comprehensively.

This detailed analysis encapsulates the key legal issues surrounding the waiver of pre-deposit of tax, liability under reverse charge basis, legislative amendments impacting tax liability, and the limitation period for tax demands in the context of the Tribunal's judgment.