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2015 (9) TMI 421 - HC - Service TaxLevy of service tax - services rendered prior to levy - payment received after the levy - consulting engineering services - Held that - the demand of service tax is in relation to services received prior to 18.4.2006 and, therefore, by virtue of the above said circular dated 26-9-2011, there will be no liability. - Decided against the revenue.
Issues Involved:
1. Date for payment of service tax - agreement date vs. payment date for continuous services. 2. Determination of service falling under "consulting engineering services" as per Section 65(31) of the Finance Act, 1994. 3. Compliance with statutory provisions in Section 68 of the Finance Act, 1994 and Rule 6 of the Service Tax Rules, 1994. Issue 1: Date for Payment of Service Tax The Department challenged the Final Order passed by the Tribunal, questioning whether the relevant date for payment of service tax is the date of agreement or the date of payment for continuous services provided over a period of time. The Department contended that service tax was demanded based on a Technical Assistance Agreement with a foreign collaborator, where the person receiving the taxable service is liable to pay service tax. However, the Ministry of Finance clarified through a circular that the liability for service tax on services provided by a non-resident or a person located outside India to a recipient in India arises only from 18.4.2006, the date of enactment of Section 66A of the Finance Act, 1994. As the demand for service tax in this case was for services received prior to 18.4.2006, the circular absolved the liability, resulting in the dismissal of the appeal without delving into the merits of the questions of law. Issue 2: Determination of Service Category The Department also contested whether the service in question falls within the scope of "consulting engineering services" as defined in Section 65(31) of the Finance Act, 1994. The Tribunal's decision was questioned for allegedly ignoring the factual matrix of the case in making this determination. However, due to the specific circular issued by the Ministry of Finance, the liability for service tax on such services provided by non-residents or persons located outside India was clarified to arise only from 18.4.2006. Consequently, the appeal was dismissed based on the circular, and no further analysis was conducted on this issue. Issue 3: Compliance with Statutory Provisions Lastly, the Department raised the issue of whether the Tribunal's order was contrary to the statutory provisions in Section 68 of the Finance Act, 1994, read with Rule 6 of the Service Tax Rules, 1994. The circular issued by the Ministry of Finance, specifically addressing the applicability of service tax on services provided by non-residents or persons located outside India, superseded the need for a detailed examination of this issue in the appeal. As the circular absolved the liability for services received prior to 18.4.2006, the appeal was dismissed without further consideration of this statutory compliance aspect. In conclusion, the judgment of the High Court in this case primarily revolved around the applicability of service tax on services provided by non-residents or persons located outside India, with a specific focus on the date from which such liability arises. The detailed circular issued by the Ministry of Finance played a pivotal role in resolving the issues raised by the Department, ultimately leading to the dismissal of the appeal without a thorough examination of the legal questions posed.
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