2008 (12) TMI 61 - AT - Service Tax

Assessee paid sale commission to foreign brand company in respect of goods exported by them - the liability of payment of tax - held that service recipient of the Consultant Engineer provided from outside India became liable to pay service tax not prior to 1.1.2005 in view of amendment of Service Tax Rules therefore, demand of tax from 1.1.2005 to 31.12.2005 is not sustainable

Summary

Issues:
Liability of payment of tax on the assessee for sale commission paid to foreign brand company in respect of exported goods.

Analysis:
The Appellate Tribunal CESTAT, New Delhi, comprising Mr. M. Veeraiyan and Mr. P.K. Das, considered the issue of tax liability on the assessee for paying sale commission to a foreign brand company for exported goods. The Commissioner (Appeals) had held the assessee liable to pay service tax from 1.1.2005 onwards and confirmed the tax demand for that period. The Revenue appealed to set aside the demand before 1.1.2005, while the assessee appealed against the demand for the period from 1.1.2005 to 31.12.2005. The Tribunal referred to the decision in the case of Foster Wheeler Energy Ltd. vs. C.C. Ex. & Cus., Vadodara II, which clarified the tax liability on offshore services. The Tribunal also cited the Service Tax Circular No. 36/4/01, stating that services provided beyond territorial waters were not subject to service tax until the amendment with the insertion of Section 66A in the Finance Act, 2006.

The Tribunal further highlighted the decision of the Larger Bench in the case of Hindustan Zinc Ltd., which established that the service recipient of a Consultant Engineer from outside India became liable to pay service tax not before 1.1.2005 due to an amendment in the Service Tax Rules. Building on these precedents, the Tribunal concluded that the demand of tax from 1.1.2005 to 31.12.2005 was not sustainable. Consequently, the Commissioner's order confirming the tax demand for that period was set aside, and the appeal by the assessee was allowed with consequential relief.

In summary, the Tribunal rejected the Revenue's appeal, citing the decision in the Hindustan Zinc Ltd. case, and allowed the assessee's appeal based on the principles established in the Foster Wheeler Energy Ltd. case, ultimately providing relief to the assessee regarding the tax liability for the specified period.