2017 (9) TMI 161 - AT - Service Tax

Classification of services - Import of service - Consulting engineer services - technical and inspection service - services performed outside India - place of provision of service - reverse charge mechanism - Held that - the learned Commissioner (Appeals) has conclusively decided the classification of the service under Technical inspection and certification services and held that it neither falls under Consulting Engineers Service as alleged in the show-cause notice nor under Management Consultancy Service as held in the order-in-original - As per the fact, the said technical and inspection service was admittedly provided by the foreign service provider based in Germany at Amur Shipbuilding Plant at Russia on behalf of the respondent. Therefore, the service was wholly performed by M/s.Schiffko GMBH, Germany at Russia, no part of such service was performed in India. Therefore, in terms of Rule 3 (ii) of Taxation of Services (Provided from outside India and received in India) Rules, 2006, service is not taxable in the hands of the respondent under the reverse charge mechanism. The service itself is not taxable, whether it is provided prior to 18/04/2006 or thereafter does not make any difference as the service remains non-taxable throughout the relevant period - appeal dismissed - decided against Revenue.

Issues Involved:
1. Classification of services under the Finance Act, 1994.
2. Applicability of service tax under the reverse charge mechanism.
3. Determination of the period of service for tax applicability.
4. Territorial applicability of service tax for services performed outside India.

Detailed Analysis:

1. Classification of Services:
The primary issue was whether the services rendered by the contractor fell under 'Consulting Engineers Service,' 'Management Consultancy Services,' or 'Technical Inspection and Certification Services.' The Commissioner (Appeals) concluded that the services provided, which included plan approval, supervision, and monitoring during the construction of a seismic survey vessel, fell under 'Technical Inspection and Certification Services.' This classification was not contested by the Revenue in their appeal, thus attaining finality.

2. Applicability of Service Tax under Reverse Charge Mechanism:
The adjudicating authority initially held that the appellant was liable to pay service tax under the reverse charge mechanism as per Section 66A of the Finance Act, 1994, and the Taxation of Services (Provided from Outside India and received in India) Rules, 2006. However, the Commissioner (Appeals) and subsequently the Tribunal found that since the services were classified as 'Technical Inspection and Certification Services' and were wholly performed outside India (in Russia by a German company), they were not taxable under the reverse charge mechanism.

3. Determination of the Period of Service for Tax Applicability:
The Revenue contended that the Commissioner (Appeals) did not base their findings on documentary evidence regarding whether the services were provided before or after the cut-off date of 18/04/2006. However, this issue became moot because the Tribunal upheld that the services were non-taxable throughout the relevant period, irrespective of the cut-off date, as they were performed entirely outside India.

4. Territorial Applicability of Service Tax:
The Tribunal relied on various judgments, including the Bombay High Court's decision in the Indian National Shipowners Association case, which clarified that services provided outside India by a non-resident to an Indian recipient were not taxable before the enactment of Section 66A on 18/04/2006. Even after this date, the specific services in question remained non-taxable as they were performed entirely outside India, in accordance with Rule 3(ii) of the Taxation of Services (Provided from Outside India and received in India) Rules, 2006.

Conclusion:
The Tribunal upheld the decision of the Commissioner (Appeals), confirming that the services provided by the contractor were correctly classified under 'Technical Inspection and Certification Services' and were not subject to service tax under the reverse charge mechanism, as they were wholly performed outside India. Consequently, the Revenue's appeal was dismissed, and the order-in-appeal was upheld.

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