2016 (11) TMI 701 - AT - Service Tax

Waiver of pre-deposit - Supply of Tangible Goods or Management of Maintenance or Repair Service - Barred by limitation - Held that - As the applicant was having effective control and possession of the goods, therefore, the applicant does not qualify under the category of Supply of Tangible Goods Services . In that circumstances, we are view that service tax is not payable by the applicant under the category of Supply of Tangible Goods Services under the reverse charge mechanism - Demand of service tax has been confirmed under the category of Management of Maintenance or Repair Service for the service provided to the Indian customer of the foreign principal under the warranty service whatever the expensive made by the applicant have been reimbursed from the outside of India - Decided in favor of the assessee.

Summary

Issues:
1. Tax on rental equipment under Section 65 (105) (zzzz)
2. Tax on damages received under Section 65(64) and Section 65 (105) (zzg)
3. Tax on market research agency service under Section 65 (105) (Y)

Issue 1: Tax on rental equipment under Section 65 (105) (zzzz):
The appellant contested the demand of service tax amounting to ?55,48,033 under the category of 'Supply of Tangible Goods.' The argument was based on the absence of VAT payment and the return of goods to M/s Livingston UK. The appellant asserted that VAT payment was not a prerequisite for service tax, especially in the case of imported goods. Referring to legal precedents, the appellant claimed that as the effective control and possession of goods were transferred to them, service tax on rent for imported equipment was unwarranted. The Tribunal agreed, citing the case of State of Andhra Pradesh Vs. Rashtriya Ispat Nigam Ltd., and ruled that as the appellant had control and possession of the goods, service tax under 'Supply of Tangible Goods Services' was not applicable.

Issue 2: Tax on damages received under Section 65(64) and Section 65 (105) (zzg):
The demand for service tax on damages received was challenged, contending that the activity qualified as Business Auxiliary Service and was not liable for service tax. The Tribunal noted that the appellant's actions aligned with the decision in Blue Star Ltd. vs. CST, Mumbai, and ruled that the appellant was not liable to pay service tax for the damages received.

Issue 3: Tax on market research agency service under Section 65 (105) (Y):
Regarding the tax on services provided under a Market Service Agreement, the appellant argued that the services fell under Business Auxiliary Services and qualified as export of service. Citing legal precedents, the appellant claimed exemption from service tax. The Tribunal concurred, stating that the services provided were covered under Business Auxiliary Services and had been exported outside India. Consequently, the Tribunal waived the requirement of pre-deposit for the balance amount of service tax, interest, and penalties during the appeal's pendency.

In conclusion, the Tribunal ruled in favor of the appellant on all three issues, holding that the service tax demands were not sustainable due to various legal and factual reasons. The Tribunal also acknowledged the appellant's compliance with pre-deposit requirements and stayed the recovery of the balance amount during the appeal process.