2015 (5) TMI 342 - AT - Service Tax

Consulting engineer's service - reverse charge mechanism on JDE and on DEC - Held that - The demand of service tax on JDE is on reverse charge mechanism while on DEC is on the ground that they have rendered the services. Demand of service tax liability does not survive in view of the law as settled by the hon'ble High Court of Bombay in the case of Indian National Ship Owner's Association vs. Union of India 2008 (12) TMI 41 - BOMBAY HIGH COURT which has been upheld by the hon'ble apex Court 2009 (12) TMI 850 - SUPREME COURT OF INDIA . We note that, in the case of JDE, the service tax demand has been confirmed by invoking the provisions of Rule 2(1)(d)(iv) of the Service Tax Rules which has been extensively dealt with by the hon'ble High Court of Bombay in the case of Indian National Shipowners Association (supra). As per the law settled, demand of service under reverse charge mechanism can only be w.e.f. 18/04/2006. - impugned order confirming demand on JDE is not sustainable and is liable to be set aside and we do so. - Decided in favour of assessee.

Summary

Issues:
1. Liability of service tax under reverse charge mechanism on JDE and DEC for consulting engineer's service.
2. Applicability of service tax provisions to DEC, a company situated in the USA with no office in India.

Analysis:
1. The case involved two interconnected companies, JDE and DEC, under a technical collaboration agreement for consulting engineer's service. The lower authorities held both companies liable for service tax under reverse charge mechanism for the period 01/04/2003 to 31/03/2004. Show cause notices were contested, and penalties were imposed. The counsel for the appellants argued that JDE's service tax liability did not arise before 18/04/2006 due to the absence of Section 66A before that date. The Tribunal found merit in this argument, citing the law established by the Bombay High Court and the Supreme Court. The demand on JDE was set aside based on the law's interpretation regarding the reverse charge mechanism.

2. Regarding DEC, situated in the USA without any office in India, the issue was whether the Finance Act, 1994 provisions applied to an entity located abroad. The Tribunal concluded that the Act did not apply to entities outside India with no office or permanent establishment in India. Therefore, the demand on DEC was considered not applicable under the law. Consequently, the order confirming the demand on DEC was set aside. Both appeals were allowed with any consequential relief as per the law.