2014 (1) TMI 1509 - AT - Service Tax

Waiver of service tax - Reverse change - Business Auxiliary Services - Two SCN issued for same period - Held that - the agreement is made between the applicant and the foreign service provider. Therefore, it cannot be said that the Foreign Service provider has provided service to Dubai office and not to the present applicant. - in view of the provisions of Section 66A of the Finance Act, the applicants are liable to pay service tax in respect of the services received from the foreign service provider on reverse charge mechanism. There is a duplication of demand in respect of show-cause notices 1 and 2, we find that both the show-cause notices are for the same period and on the same ground. Therefore for the said purpose we find prima facie merit in the contention of the applicant. In respect of other show-cause notices after taking into consideration of the amounts paid as commission as shown in the balance sheet comes to approximately Rs. 1 lakh. In respect of show-cause notice for the demand of Rs. 1,89,22,265/- we find that the applicants had not make out a case for waiver - Conditional stay granted.

Summary

Issues:
- Total waiver of service tax, interest, and penalty demanded from the applicant.
- Duplication of demand in show-cause notices.
- Liability to pay service tax under reverse charge mechanism.
- Interpretation of Section 66A of the Finance Act, 1994.

Analysis:
1. The applicant sought total waiver of a substantial service tax amount, interest, and penalty. The demand was confirmed due to the receipt of Business Auxiliary Services from a Foreign Service Provider, making the applicant liable for service tax as the recipient of services.

2. The applicant raised concerns regarding duplication in the demand as four show-cause notices were issued for service tax. Notices 1 and 2 covered the same period and ground, issued by different authorities, leading to a potential duplication in the demand.

3. The Revenue contended that the applicant, engaged in software development in India, received taxable services through its Dubai office, connecting to marketing and promotion activities. The Teaming Agreement with a foreign service provider indicated the liability to pay service tax under the reverse charge mechanism as per Section 66A of the Finance Act.

4. The main dispute revolved around whether the applicant received services from the foreign service provider directly or through its Dubai office, which was considered a permanent establishment. The applicant argued that dealings with the Dubai office should not be taxed under the reverse charge mechanism.

5. The Tribunal analyzed Section 66A of the Finance Act, emphasizing that the agreement between the applicant and the foreign service provider established the liability for service tax under the reverse charge mechanism, rejecting the applicant's argument of not directly receiving services.

6. The Tribunal found the decision cited by the applicant inapplicable to the present case, distinguishing the scenario where the service provider and recipient were both outside India. Regarding the duplication of demand in show-cause notices 1 and 2, the Tribunal acknowledged prima facie merit in the applicant's contention.

7. Ultimately, the Tribunal directed the applicant to pre-deposit a specified amount within a set period, considering financial hardships and safeguarding the Revenue's interest. Upon compliance, the remaining duty, interest, and penalty were waived, with recovery stayed during the appeal's pendency. Compliance reporting was set for a specific date.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, legal interpretations, and the Tribunal's decision, providing a comprehensive overview of the case.