2008 (11) TMI 122 - AT - Service Tax

Service tax demand on payment made to a foreign collaborator on account of services of technical know-how/assistance received by them - period involved is December 2002 to March 2003 Larger Bench of Tribunal, in the case of Hindustan Zinc Ltd. has held that the recipient of taxable services received from outside India is liable to pay service tax only from 1-1-2005, in terms of Notification No. 36/2004-ST - in view of above decision demand is not sustainable in present case

Summary

Issues:
1. Liability of the appellant for service tax payment to a foreign collaborator for technical know-how/assistance received.
2. Applicability of Notification No. 36/2004-Service Tax dated 31-12-2004 on the recipient of taxable services from outside India.
3. Interpretation of the decision in Hindustan Zinc Ltd. v. CCE [2008] 18 STT 67 (New Delhi-CESTAT) regarding the liability of the recipient for service tax payment prior to 1-1-2005.

Issue 1: Liability for service tax payment to a foreign collaborator
The authorities confirmed service tax against the appellant for payments made to a foreign collaborator for technical know-how/assistance during December 2002 to March 2003. However, the Larger Bench decision in Hindustan Zinc Ltd. v. CCE clarified that the recipient of taxable services from outside India becomes liable to pay service tax only from 1-1-2005 as per Notification No. 36/2004-Service Tax. Consequently, the Tribunal held that the appellant is not liable to pay any tax for services received from the foreign collaborator before 1-1-2005. As a result, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

Issue 2: Applicability of Notification No. 36/2004-Service Tax
The Tribunal emphasized the significance of Notification No. 36/2004-Service Tax dated 31-12-2004 in determining the liability of the recipient of taxable services from outside India. The decision in Hindustan Zinc Ltd. v. CCE highlighted that this notification specified that the recipient of such services would only become liable to pay service tax from 1-1-2005. Therefore, the Tribunal concluded that the appellant was not obligated to pay any tax for services received from the foreign collaborator prior to 1-1-2005 based on the provisions of this notification.

Issue 3: Interpretation of Hindustan Zinc Ltd. v. CCE decision
The Tribunal extensively discussed and interpreted the decision in Hindustan Zinc Ltd. v. CCE, where it was established that the recipient of consulting engineer services from outside India was not liable to pay service tax before 1-1-2005. By referring to this decision, the Tribunal determined that the appellant, as a recipient of services from a foreign collaborator, was not required to pay service tax prior to 1-1-2005. Therefore, the Tribunal set aside the impugned order solely on this ground, providing consequential relief to the appellant by allowing the appeal.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision regarding the liability of the appellant for service tax payment to a foreign collaborator for services received before 1-1-2005.