2006 (1) TMI 656 - HC - Central Excise

Summary

Issues:
1. Challenge to order confirming service tax demand on Consulting Engineer services.
2. Interpretation of tax liability for services rendered outside India.
3. Appealability of order passed by Additional Commissioner.
4. Consideration of circular dated 3.3.2004 in appeal process.
5. Application of Rule 6 of Service Tax Rules in determining tax liability.
6. Assessment of service tax payment based on presence in India.

1. Challenge to Service Tax Demand:
The writ petition challenges the order confirming a service tax demand on Consulting Engineer services provided to a chemical fertilizer manufacturer. The petition argues that services were rendered outside India, making them non-taxable under the Act. It contests the imposition of penalty and interest, claiming the order failed to consider material contentions and evidence presented.

2. Interpretation of Tax Liability:
The petition asserts that services provided by the Consulting Engineer were to be rendered only in the Netherlands, where the provider operated from. It argues that the destination-based consumption tax principle is irrelevant when services are performed outside India. The petition highlights the presence of the provider's representatives in India for data collection purposes, not for service provision, and challenges the tax liability based on the limited duration of their stay.

3. Appealability of Order:
The respondents argue that the order is appealable to the Commissioner under Section 85 of the Act. However, the petition contends that a subsequent circular dated 3.3.2004 restricts the appeal process, stating that no appeal lies against the order. The court determines that the circular issued before the appeal period expired renders the appeal to the Commissioner non-maintainable.

4. Consideration of Circular in Appeal Process:
The petition raises the issue of the circular dated 3.3.2004 impacting the appeal process, indicating that orders by the Additional Commissioner cannot be revised or appealed under Sections 84, 85, and 86 of the Act. The court acknowledges the circular's effect on the appeal rights and rules against the appealability of the order to the Commissioner.

5. Application of Rule 6 of Service Tax Rules:
The debate centers on the application of Rule 6 of the Service Tax Rules, particularly before and after the circular dated 16.8.2002. The respondents argue that the circular clarifies tax liability for both service providers and recipients, enabling the recovery of service tax from the provider. The petition contests this interpretation, emphasizing the limited tax liability for services rendered in India.

6. Assessment of Service Tax Payment:
The court notes the failure of the Additional Commissioner to consider the petitioners' argument regarding the proportionate service tax payment based on the representatives' presence in India for 161 days. It highlights the lack of specific consideration of the key contention determining tax liability, leading to the order's setting aside and remittance for proper adjudication based on the petitioner's submissions.

In conclusion, the court allows the petition, setting aside the order and remitting the matter for reconsideration by the competent authority in light of the arguments presented and legal provisions discussed in the judgment.