2008 (11) TMI 84 - AT - Service Tax

Whether service tax is payable on the amount paid by the assessee as commission to overseas agent, foreign based company, who had no office in India. - period of dispute is 8.7.04 to 31.3.05 - Circular No. 36/4/01 dated 8.10.2001 clarified that service provided beyond the territorial waters would not attract service tax - since period in dispute is before the insertion of Section 66A w.e.f. 18.4.2006, circular is relevant - appeals filed by the assessee are allowed

Summary

Issues involved:
Whether service tax is payable on the amount paid as commission to overseas agents without an office in India.

Analysis:
The appeals involved a common issue of determining the liability of service tax on the commission paid to overseas agents without a presence in India. The period of dispute ranged from 8.7.04 to 31.3.05 for one appellant and from 9.7.2004 to 30.9.2005 for another. The adjudicating authority had confirmed the tax demand and imposed penalties, leading to appeals from both the Revenue and the assessees against the Commissioner (Appeals) order. The Tribunal referred to the decision in Hindustan Zinc Ltd. vs. CCE, Jaipur, which held that taxable services provided by non-recipients from outside India without an office in India were considered taxable services effective from 1.1.2005. Additionally, the Tribunal cited the case of Foster Wheeler Energy Ltd. vs. CCE & Cus. Vadodara-II, which established that offshore services became liable to pay service tax from 18.4.2006. As a result, the liability for tax payment by the assessee for services rendered by foreign companies without an office in India was deemed effective from 18.4.2006.

The Revenue reiterated the Commissioner (Appeals) findings and referred to the case of Unitech Ltd. vs. CST, Delhi, which held that the recipient of services provided by a foreign company would be liable to pay tax from 1.1.2005. The advocates for the assessees relied on the decision in Foster Wheeler Energy Ltd., emphasizing that services rendered from outside India were distinct and not liable for tax before 18.4.2006. The Tribunal considered the amendment with the insertion of Section 66A in the Service Tax Provisions by the Finance Act, 2006, effective from 18.4.2006. The decision in Foster Wheeler Energy Ltd. highlighted the distinction between onshore and offshore services, indicating that offshore services were not taxable before the amendment. The Tribunal also noted Service Tax Circular No. 36/4/01, which exempted services provided beyond territorial waters from service tax until the amendment on 18.4.2006.

Based on the discussions and the precedent set by Foster Wheeler Energy Ltd., the Tribunal set aside the tax demand, interest, and penalties, allowing the appeals filed by the assessees and rejecting the appeal filed by the Revenue. The decision aligned with the interpretation that offshore services were not subject to service tax before the amendment on 18.4.2006.