2008 (9) TMI 182 - AT - Service Tax

Consulting Engineers services received from outside India for the period from July, 2002 to December, 2004 - There is a twin requirement under the law to be specified before a recipient of the Consulting Engineers services from abroad can be made liable to tax - Since the twin legal requirement has not been satisfied before 1-1-05 and since the legal position has been upheld by the Larger Bench of the Tribunal in the case of Hindustan Zinc Ltd. Demand set aside

Summary

Issues:
1. Liability of Service Tax on Consulting Engineers services received from outside India.
2. Legal requirements for imposing Service Tax on recipients of Consulting Engineers services.
3. Effectiveness of Notifications under Section 68(2) of the Finance Act, 1994.
4. Applicability of Rule 2(1)(d)(iv) in the Service Tax Rules, 1994.
5. Interpretation of legal position upheld by the Larger Bench of the Tribunal in Hindustan Zinc Ltd. v. Commr. of Central Excise, Jaipur.
6. Disposal of appeal against the Larger Bench decision.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Kolkata pertains to the liability of Service Tax on Consulting Engineers services received from outside India. The appellants were subjected to Service Tax for services received between July 2002 and December 2004. The appellant's representative argued that the recipient is not liable to pay Service tax unless specific legal requirements are met. These requirements include a Notification under Section 68(2) of the Finance Act, 1994 and the prescription of the person liable to pay the tax, as per Rule 2(1)(d)(iv) in the Service Tax Rules, 1994. The representative cited a decision by the Larger Bench of the Tribunal in the Hindustan Zinc Ltd. case, supporting the argument that both requirements must be satisfied for tax liability.

The Department's representative requested time to verify if an appeal was filed against the Larger Bench Order. However, the Tribunal disagreed, emphasizing that since the legal requirements were not fulfilled before 1-1-2005 and considering the precedent set by the Hindustan Zinc Ltd. case, the appellant's argument was valid. The Tribunal decided not to delay the decision, stating that if the Department had appealed the Larger Bench decision, they could do so for other similar cases as well.

Based on the legal position upheld by the Larger Bench in the Hindustan Zinc Ltd. case, the Tribunal dispensed with the requirement of pre-deposit, set aside the impugned order, and allowed the appeal. The judgment highlights the importance of meeting specific legal requirements before imposing Service Tax and the significance of precedent set by higher judicial bodies in interpreting tax liability issues.