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2008 (1) TMI 325 - AT - Service TaxAssessee paid commission to commission agents for sales abroad import of services revenue contends that after amendment in rule 2(1)(d)(iv) recipient of service became liable to pay tax held that Rule 2 is only the definition clause not a substantive provision of a statute hence in the absence of any substantive provision, creating tax liability on the recipient, prior to enactment of section 66A w.e.f. 18-4-2006, the recipient of the tax was not liable to pay service tax stay granted
Issues:
1. Stay of service tax and penalties demanded from the appellant. 2. Liability of the recipient to pay service tax for the period in question. 3. Interpretation of the amendment in rule 2(1)(d)(iv) of the Service Tax Rules. 4. Entitlement of the appellant to waiver of the tax demanded. Analysis: Issue 1: Stay of service tax and penalties demanded The appeal was heard on the point of stay, where the appellant was required to pay service tax of Rs. 25,10,324 and equal penalty amounts under various sections. The appellant sought waiver of the pre-deposit requirement under section 35F. Issue 2: Liability of the recipient to pay service tax The appellant, engaged in manufacturing and selling machine parts, was involved in a dispute regarding commission payments received as agents for sales abroad. The key consideration was whether the appellant, as a recipient, was liable to pay service tax for the period in question. The appellant argued that prior to the enactment of section 66A of the Finance Act, 1994, there was no such liability, while the revenue contended that the recipient became liable due to an amendment in the Service Tax Rules. Issue 3: Interpretation of the amendment in rule 2(1)(d)(iv) The Tribunal opined that the amendment in rule 2(1)(d)(iv) did not create any new liability. It was clarified that a definition clause like Rule 2 cannot establish a substantive provision for tax liability. In the absence of a clear provision creating tax liability on the recipient before the enactment of section 66A, the recipient was not obligated to pay service tax. Therefore, the Tribunal concluded that the appellant was entitled to a full waiver of the tax demanded. Issue 4: Entitlement to waiver of the tax demanded The Tribunal, based on the above analysis, directed a complete waiver of the service tax amounts and penalties until the appeal's final disposal. Additionally, the appeal was to be combined with another Service Tax Appeal for a joint final hearing. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the appellant's liability for service tax and the entitlement to waiver of the tax demanded.
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