2014 (10) TMI 95 - AT - Service Tax

Classification of service - Consulting Engineer Service or Real Estate Agent Service - Import of servcies - Commission (appeals) agreed with the classification under Real Estate Agent service but set aside the demand of tax holding that the services were mainly provided offshore and only some peripheral activities such as visit of personnel to the site were performed in India and other attendant expenses on communication and temporary structure facilities were incurred in India and therefore service tax is not leviable. - Held that - there seems to over lapping between the description of the two services. Although, some components in the definition of Real Estate Consultant have been performed by Bechtel, the description of some components in the definition appear to be related to rendering service in relation to sale, purchase, leasing or renting of Real Estate. However, the activities of a Consulting Engineer are more comprehensive in scope as they cover all disciplines of consultancy and engineering be it feasibility study, detailed designing, construction, civil, mechanical, electrical engineering etc. The contention of the appellant that the Consulting Engineer Service more specifically describes the service provided by them and is the correct classification in terms of Section 65A (2) (a) for determination of classification is accepted. - the service provided by M/s. Bechtel comes under the category of Consulting Engineer Service. Offshore Services and levy of tax - Held that - Keeping aside the peripheral activities of deputing personnel to India, the demand of service tax from a foreign entity is not valid especially when Revenue has not put forth any evidence that the services provided under the Agreement were not provided offshore. - Even if Revenue s stand (although Revenue s stand is not very clear) is that service has been provided from offshore territory to India, we find it is a settled matter that Service Tax on services provided by a service provider located outside India to a recipient in India is leviable only from 18.4.2006 with the introduction of Section 66A. - Decided against Revenue.

Summary

Issues Involved:
1. Classification of services provided by Bechtel Overseas Corporation Ltd.
2. Taxability of services provided offshore by Bechtel Overseas Corporation Ltd.
3. Liability for payment of service tax.

Issue-wise Detailed Analysis:

1. Classification of Services Provided by Bechtel Overseas Corporation Ltd.:
The primary issue was whether the services provided by Bechtel fell under the category of "Real Estate Agent Service" or "Consulting Engineer Service." The Revenue classified the services as Real Estate Agent Service, while Bechtel contended that their services were more appropriately classified under Consulting Engineer Service. The Tribunal examined the scope of services as delineated in Appendix 'A' of the agreement between Sahara and Bechtel. It was noted that Bechtel provided offshore technical support in various engineering disciplines, including project management, design, construction supervision, and technical assistance. The Tribunal concluded that the services provided by Bechtel were comprehensive and fell under the category of Consulting Engineer Service, as they involved detailed engineering activities and technical expertise, rather than services related to the sale, purchase, leasing, or renting of real estate.

2. Taxability of Services Provided Offshore by Bechtel Overseas Corporation Ltd.:
The second issue was whether the services provided offshore by Bechtel were taxable under Indian service tax laws for the period from 25.01.2001 to 08.02.2002. The Tribunal noted that the services were primarily provided offshore, with only peripheral activities such as site visits and communication expenses incurred in India. The Tribunal observed that during the material period, the Service Tax Act extended only to the territory of India, and there was no legal provision to tax services provided from outside India to a recipient in India until the introduction of Section 66A on 18.04.2006. Therefore, the Tribunal held that the demand for service tax from Bechtel for the period in question was not legally valid.

3. Liability for Payment of Service Tax:
The third issue concerned the liability for payment of service tax. The Tribunal noted that Bechtel did not have a business establishment in India and that the agreement between Sahara and Bechtel explicitly stated that any service tax applicable on the services rendered by Bechtel would be paid by Sahara. The Tribunal referred to Rule 6(1) of the Service Tax Rules, 1994, which stipulated that in the case of a non-resident service provider without an office in India, the liability to pay service tax would be on the service recipient. The Tribunal cited the Supreme Court decision in Kerala State Electricity Board Vs. CCE, Thiruvananthapuram, which supported this interpretation. Consequently, the Tribunal held that the liability to pay service tax, if any, was on Sahara, not Bechtel.

Conclusion:
The Tribunal dismissed the Revenue's appeal and upheld the classification of services provided by Bechtel as Consulting Engineer Service. It also ruled that the services provided offshore by Bechtel were not taxable for the period in question and that the liability to pay any service tax rested with Sahara, the service recipient. The cross-objections were also disposed of accordingly.