2017 (9) TMI 1189 - AT - Service Tax

Reverse charge mechanism - amount paid to a foreign company towards testing charges and product updation - period in dispute is 2003 to 2004 - whether assessee who is receiving the services of a foreign company is liable to pay service tax on the amounts paid to the foreign company under reverse charge mechanism before insertion of Section 66A in the Finance Act, 1994? - Held that - the issue is settled by the judgment of the Hon ble High Court of Bombay in the case of Indian National Shipowners Association Vs. Union of India 2008 (12) TMI 41 - BOMBAY HIGH COURT wherein it has been held that the recipient in India would be liable to service tax only from 18.4.2006, which is after the enactment of Section 66A in the Finance Act, 1994 - the period of dispute being prior to 18.4.2006, the demand of service tax is unsustainable - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Liability to pay service tax on amounts paid to a foreign company for services provided.
2. Classification of services under 'Technical Inspection and Certification Services' and 'Consulting Engineering Service'.
3. Applicability of service tax prior to 18.4.2006.

Analysis:

Issue 1: Liability to pay service tax on amounts paid to a foreign company for services provided:
The case involved manufacturers of on load tap changers who paid an amount to a foreign company for testing charges and product updation. The department contended that the assessee is liable to pay service tax for services received. The counsel for the assessee argued that liability for service tax arises only after the enactment of Section 66A in the Finance Act, 1994, as per a judgment of the Hon'ble High Court of Bombay. The Tribunal, following the said judgment, concluded that the demand for service tax for the period before 18.4.2006 was unsustainable. Consequently, the appeal filed by the department was dismissed.

Issue 2: Classification of services under 'Technical Inspection and Certification Services' and 'Consulting Engineering Service':
The Commissioner (Appeals) classified the services received by the assessee under 'Technical Inspection and Certification Services' and 'Consulting Engineering Service'. The assessee filed an appeal, arguing that since the services were not taxable before 18.4.2006, the appeal was only technical in nature. With the department's appeal being dismissed on the grounds of non-liability for service tax before 18.4.2006, the Tribunal deemed the assessee's appeal as infructuous and dismissed it accordingly.

Issue 3: Applicability of service tax prior to 18.4.2006:
The Tribunal's decision was based on the interpretation of the law regarding the applicability of service tax before the enactment of Section 66A in the Finance Act, 1994. Relying on the judgment of the Hon'ble High Court of Bombay, the Tribunal held that the recipient in India would be liable to service tax only from 18.4.2006 onwards. Therefore, the demand for service tax for the period in dispute, which was prior to 18.4.2006, was deemed unsustainable, leading to the dismissal of the department's appeal and the subsequent dismissal of the assessee's appeal.

In conclusion, the Tribunal's judgment revolved around the liability for service tax, classification of services, and the applicability of service tax before 18.4.2006, ultimately resulting in the dismissal of both appeals based on the non-liability of the assessee for service tax during the relevant period.