2008 (11) TMI 83 - AT - Service Tax

Agreement for providing services of technical know-how and assistance issue involved is liability of recipient of taxable service provided by non-resident or is from outside India and does not have any office in India - issue has been settled in assessee s favour by the LB of the Tribunal in the case of Hindustan Zinc Ltd. - held that as a recipient of the consulting engineer service from outside India the appellant was not liable to pay service tax prior to 1.1.2005 demand not sustainable

Summary

Issues Involved:
Liability of service tax on recipient of service provided by a non-resident or from outside India prior to 1.1.2005.

Detailed Analysis:

1. Background:
The case involved a foreign-based company (Appellant No.1) and an Indian company (Appellant No.2) entering into an agreement for technical know-how services. Service tax was demanded on Appellant No.1 for providing services to Appellant No.2 for a specific period, and later on Appellant No.2 was also demanded tax as the recipient of the service.

2. Legal Issue:
The primary issue was whether the liability to pay service tax on the recipient of services provided by a non-resident or from outside India was sustainable prior to 1.1.2005. The Tribunal referred to the case of Hindustan Zinc Ltd. vs. C.C.E., Jaipur, which held that prior to 1.1.2005, the recipient of consulting engineers service from a non-resident or outside India was not liable to pay service tax.

3. Tribunal's Decision:
The Tribunal concurred with the view that recipients of services from outside India, where the provider does not have an office in India, cannot be held liable for service tax. In this case, as Appellant No.1 did not have an office in India, the demand for service tax on them was deemed unsustainable.

4. Conclusion:
Based on the above analysis, the Tribunal found that the demand for tax and penalties on the appellants were not sustainable. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief.

This judgment clarifies the liability of service tax on recipients of services provided by non-residents or entities from outside India before 1.1.2005, emphasizing that in such cases, where the service provider does not have an office in India, the recipient is not liable to pay service tax.