2007 (5) TMI 145 - AT - Service Tax

As per the appellant the taxable services received from Foreign Service provider became taxable by Notification No.36/2004-S.T. with effect from 01-01-05 but as per revenue taxable by virtue of Notification No. 12/02 dated 01-08-02 Pre-deposit of Rs. 25,000 ordered and balance waived

Summary

Issues:
Challenge to Commissioner (Appeals) order upholding Service Tax demands and penalties. Interpretation of Notification under Section 68(2) of the Finance Act, 1994 regarding liability on services received from foreign service provider. Analysis of Rule 2(d)(iv) in relation to liability to pay Service Tax. Consideration of conflicting decisions by Single Member Bench and Division Bench. Determination of waiver of pre-deposit in stay applications.

Analysis:
The judgment concerns a challenge to the Commissioner (Appeals) order confirming Service Tax demands and penalties imposed on the applicant. The main issue revolves around the interpretation of the Notification under Section 68(2) of the Finance Act, 1994, which notified taxable services for the purpose of Service Tax liability. The applicant argued that no liability existed prior to the Notification coming into force on 1-1-2005. This argument was supported by a decision in the Aditya Cement case and the Ispat Industries case, emphasizing that Service Tax was not leviable on the receiver before 1-1-2005.

The Department's representative contended that Rule 2(d)(iv) mandated Service Tax payment by the receiver, irrespective of the Notification, as per powers under Section 4(2)(1) of the Act. Section 68(1) imposed the liability to pay Service Tax on service providers, with sub-section (2) specifying the payment responsibility for notified taxable services. The clause (iv) of Rule 2(d) made the recipient of services from non-resident providers liable to pay Service Tax. The judgment highlighted the importance of Rule 2(d)(iv) in creating a statutory liability for service receivers, regardless of subsequent notifications.

The Tribunal acknowledged the conflicting views of the Single Member Bench and Division Bench on the interpretation of Rule 2(d)(iv). Despite the debatable nature of the issue, the Tribunal directed the applicant to make specific deposits within a stipulated time frame, considering the prima facie liability created by Rule 2(d)(iv). Failure to comply would result in dismissal of the appeal. The decision focused on the understanding of taxable services under Section 65(105) of the Act and the applicability of Rule 2(d)(iv) to all taxable services.

In conclusion, the judgment addressed the waiver of pre-deposit in stay applications based on the interpretation of Rule 2(d)(iv) and the statutory liability it imposed on service receivers. The Tribunal's decision aimed to balance the conflicting interpretations while ensuring compliance with the Service Tax regulations.