2008 (12) TMI 107 - AT - Service Tax

Demand - Consulting Engineer - Appellant received technical know-how for manufacture of steering assembly from foreign company during 2003-04 by applying the ratio of decision of tribunal in case of Hindustan Zinc Ltd. v. CCE, held that only by issue of Notification No. 36/2004, dated 31-12-2004, Indian recipients of services from abroad were notified as persons liable to pay service tax since period in impugned case is prior to 31.12.04, demand from appellant is not justified

Summary

Issues: Liability of recipient to pay service tax on technical know-how received from abroad under the Service Tax Rules, 1994.

Analysis:
1. The case involved a dispute regarding the liability of a company, RTSS, to pay service tax on technical know-how received from a foreign entity during the financial year 2003-04. The service tax demand was based on rule 2(1)(d)(iv) of the Service Tax Rules, 1994, which stated that a person receiving taxable service in India from a non-resident without an office in India is liable to pay service tax.

2. The appellant argued that they were not liable to pay service tax for the technical know-how received in 2003-04 as the relevant provision, section 66A of the Act, making Indian recipients of services from abroad liable to pay service tax, came into effect only on 18-4-2006. They also cited a precedent, Hindustan Zinc Ltd. v. CCE, where it was held that recipients of services from abroad could be taxed only after being notified under section 68(2) of the Act.

3. The Tribunal, considering the arguments and precedents, concluded that the demand for service tax on the technical know-how received by RTSS from abroad during the period before 31-12-2004 was not sustainable. The Tribunal referred to Notification No. 36/2004, issued on 31-12-2004, which notified Indian recipients of services from abroad as persons liable to pay service tax. Since the impugned service was received before this notification, the liability of RTSS to pay service tax was dismissed.

4. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, RTSS, stating that the demand for service tax on the technical know-how received from abroad during the period before the notification date was not legally sustainable. The decision was based on the interpretation of the relevant provisions of the Service Tax Rules, 1994, and the timing of the notification specifying the liability of Indian recipients of services from abroad to pay service tax.