2017 (8) TMI 1231 - AT - Service Tax

Classification of services - reverse charge mechanism - whether the service of testing and certification are classifiable as Technical Inspection Certification Services falling under Section 65(105)(zzi) of Chapter V of Finance Act, 1994 and is liable to service tax in the hand of recipient under reverse charge mechanism as provided under Section 66A read with Rule 2(1) (d) (iv) of Service Tax Rules, 1994? - Held that - service i.e. Inspection and Certification and testing of food colour sample was performed by USA Government Agency in the country of USA, therefore service wholly performed in USA only. Merely because appellant receiving certificate in India does not mean service was partly performed in India, therefore the service of Inspection and Certification covered under clause (zzi) is falling under Rule 3(ii) of Taxation of Services(provided from outside India and Received in from outside India and Received in India)Rules, 2006 and hence not taxable under Section 66A read with Rule 2(1) (d)(iv) of Service Tax Rules, 1994 - The Tribunal while deciding the case of Intas Pharmaceuticals Limited 2009 (5) TMI 73 - CESTAT, AHMEDABAD held that Technical Testing Analysis service fully rendered outside India, recipient of service in India is not liable to pay service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
Classification of service of testing and certification under "Technical Inspection & Certification Services" for service tax under reverse charge mechanism.

Analysis:
The case involved the classification of the service of testing and certification provided by the US government agency to the appellant, a manufacturer of food color, under "Technical Inspection & Certification Services" for service tax under reverse charge mechanism. The appellant contended that since the entire service was performed outside India in the USA, it should not be taxable in India. The appellant relied on previous decisions such as Intas Pharmaceuticals Limited and M/s. K G Denim Ltd to support their argument. The Tribunal considered these arguments and previous decisions, emphasizing that if a service is wholly performed outside India, the recipient in India is not liable to pay service tax. The Tribunal also noted that merely receiving the certificate in India does not mean the service was partly performed in India. The Tribunal cited various decisions, including the appellant's own case, where similar issues were decided in favor of the appellant, leading to the conclusion that the service in question is not taxable under Section 66A read with Rule 2(1)(d)(iv) of Service Tax Rules, 1994. The Tribunal set aside the impugned order and allowed the appeal, stating that the issue is no longer res integra based on consistent previous decisions.

This comprehensive analysis of the judgment highlights the key arguments presented by both parties, the legal principles applied by the Tribunal, and the reasoning behind the decision to classify the service of testing and certification as not taxable under the reverse charge mechanism.