2015 (1) TMI 768 - AT - Service Tax

Waiver of pre-deposit of service tax - Business Auxiliary Service and Technical Testing and Analysis Services - Held that - in respect of Technical Testing and Analysis Services the applicants rely upon the provisions of Rule 3 of the Taxation of Services (Provided from Outside India) Rules, 2006, particularly the proviso to Rule 3 (ii). Under this Rule the provision of sub-clause (zzh) has been omitted with effect from 1.4.2011 and certain portion of the demand is after that date. In view of above, prima facie the applicant has not made out a case for total waiver of pre-deposit. Taking into the facts and circumstances of the case, the applicants are directed to deposit ₹ 9.00 lakhs, in addition to the amount already deposited, within eight weeks. On deposit of the above mentioned amount, the pre-deposit of the remaining dues is waived and recovery thereof stayed for hearing the appeal - Partial stay granted.

Issues:
1. Waiver of pre-deposit of service tax, interest, and penalty.
2. Demand confirmation for Business Auxiliary Service and Technical Testing and Analysis Services.
3. Dispute regarding service tax under reverse charge mechanism for goods tested in China and Canada.
4. Interpretation of Rule 3 of Taxation of Services (Provided from Outside India) Rules, 2006.
5. Impact of omission of sub-clause (zzh) from the Rules with effect from 1.4.2011 on the demand.
6. Decision on the waiver of pre-deposit based on the facts and circumstances of the case.

Analysis:

1. The applicant sought a waiver of pre-deposit of service tax, interest, and penalty totaling &8377; 19,89,807/-. The demand of &8377; 32,91,070/- with interest was confirmed due to the provision of Business Auxiliary Service and Technical Testing and Analysis Services. The applicant had already paid the service tax amount confirmed for Business Auxiliary Service.

2. The dispute primarily revolved around the demand related to Technical Testing and Analysis Services. The applicant argued that the services were provided for goods tested in China and Canada, and the Revenue was demanding service tax under the reverse charge mechanism. The applicant relied on Rule 3 of the Taxation of Services (Provided from Outside India) Rules, 2006, specifically pointing to the proviso to Rule 3 (ii) to support their contention that the demand was not sustainable.

3. The Revenue contended that sub-clause (zzh) had been omitted from the Rules with effect from 1.4.2011, and part of the demand was after this date, justifying the demand made. However, the applicant's argument focused on the location of service provision in relation to the goods tested, which was outside India in China and Canada.

4. The Tribunal examined the provisions of Rule 3 of the Taxation of Services (Provided from Outside India) Rules, 2006, particularly emphasizing the impact of the omission of sub-clause (zzh) from the Rules effective from 1.4.2011. Considering the facts and circumstances of the case, the Tribunal found that the applicant had not established a case for a total waiver of pre-deposit. Consequently, the Tribunal directed the applicant to deposit &8377; 9.00 lakhs, in addition to the amount already paid, within eight weeks. Upon this deposit, the pre-deposit of the remaining dues would be waived, and the recovery stayed for the appeal hearing.

5. The decision highlighted the importance of compliance, with a specific date set for reporting on 7.8.2014 to ensure adherence to the Tribunal's directive. The judgment provided a detailed analysis of the legal provisions and factual arguments presented by both parties, ultimately leading to a specific direction regarding the pre-deposit amount and waiver based on the circumstances of the case.

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