2018 (11) TMI 843 - AT - Service Tax

Classification of services - Consulting Engineering Services or otherwise - assessee had entered into agreement with different foreign companies having no office in India - reverse charge mechanism - The Hon ble Bombay High Court and subsequently Hon ble Supreme Court in the case of Indian National Shipowners Association vs. UOI 2009 (12) TMI 850 - SUPREME COURT OF INDIA have categorically held that service tax is liable to be paid on services received from abroad only after the date of enactment of Section 66A - These views have also been circulated by CBEC vide their Circular dated 26.09.2011 - the liability for payment of service tax on services received from abroad will arise only from 18.04.2006 - demand for the prior period set aside. There is no justification for imposition of any penalty under the Finance Act, 1994. Appeal disposed off.

Summary

Issues:
Cross appeals against Order-in-Original regarding service tax liability for services received from foreign companies without offices in India, classification of services, demand for service tax, reversal of cenvat credit, applicability of Reverse Charge Mechanism, payment of interest, and imposition of penalty.

Analysis:
1. The case involved cross appeals against the Order-in-Original regarding service tax liability arising from agreements with foreign companies without offices in India for setting up a Petrochemical Refinery. The department classified the services under 'Consulting Engineering Services' and demanded service tax, interest, and penalties. The adjudicating authority confirmed a demand of &8377; 5.88 crores for service tax, dropped certain demands, and classified a portion under 'Intellectual Property Service'.

2. The appellant contested the service tax liability on Reverse Charge Basis, citing precedents that service tax is payable only from 18.04.2006 onwards. The Revenue acknowledged this but requested verification of payments made after due dates. The Tribunal noted that service tax on services from abroad is payable post the enactment of Section 66A, setting aside demands for the period before 18.04.2006.

3. The adjudicating authority upheld a demand for reversal of cenvat credit, challenged by the appellant. The Tribunal ruled in favor of the appellant, citing a clarificatory notification allowing cenvat credit retrospectively. The demand for reversal of cenvat credit was set aside, and the appellant was entitled to avail the credit.

4. The Tribunal disposed of both appeals, setting aside the demand for service tax pre-18.04.2006 and the reversal of cenvat credit. The adjudicating authority was tasked with recalculating any remaining service tax liability post that date, considering payments made. No penalty was imposed under the Finance Act, 1994, in the circumstances of the case.

This comprehensive analysis covers the issues involved in the legal judgment, addressing the service tax liability, classification of services, applicability of Reverse Charge Mechanism, cenvat credit reversal, and the absence of penalty imposition.