2022 (5) TMI 429 - AT - Service Tax

Levy of service tax - import of service - Business Auxiliary Services - appellant had entered into a Sales Commission Agreement for operational responsibility regarding sales management, key account responsibility, creditor handling, business development and marketing of the appellants product - service received from the parent company located abroad - reverse charge mechanism - period from 01/01/2005 to 15/06/2005 - HELD THAT - The learned adjudicating authority has confirmed the service tax demand under the taxable category of BAS, holding that the appellant should be liable to pay service tax for the period from 01/01/2005 to 15/06/2005 as a recipient of such service, received from the parent company located abroad, under reverse charge mechanism. For demanding service tax amount, the impugned order has referred to Rule 2(1)(d)(iv) ibid. The issue in dispute came up for consideration before the Hon ble Bombay High Court, in the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA 2008 (12) TMI 41 - BOMBAY HIGH COURT , wherein it was held that provisions of Rule 2(1)(d)(iv) ibid cannot create any tax liability which is not authorized by law and that before insertion of Section 66A with effect from 18/04/2006, there was no authority to levy service tax on import of service. It has further been held that Explanation below Section 65(105) ibid did not give any authority to levy service tax on import of service. There are no merits in the impugned order, insofar as it has confirmed the adjudged demands on the appellant - appeal allowed - decided in favor of appellant.

Issues:
1. Early hearing of appeal requested by the appellant.
2. Taxability of services provided by the parent company to the appellant.
3. Applicability of service tax under reverse charge mechanism.
4. Interpretation of Rule 2(1)(d)(iv) of the Service Tax Rules, 2004.
5. Pre-Section 66A scenario regarding levy of service tax on import of service.
6. Judicial precedents related to the taxability of import of services.

Analysis:
1. The appellant filed a miscellaneous application seeking early hearing of the appeal, which was allowed by the Tribunal considering the interest of justice. The issue in dispute was deemed not res integra based on previous judgments. Both parties consented to the appeal being heard on the same day, leading to the passing of the present order.

2. The appellant, engaged in providing "Maintenance or Repair Service," entered into a Sales Commission Agreement with its parent company for various services. The Department contended that these services should be classified under "Business Auxiliary Service" and held the appellant liable to pay service tax under Rule 2(1)(d)(iv) of the Service Tax Rules, 2004. The impugned order confirmed a service tax demand, which the appellant challenged before the Tribunal.

3. The Tribunal examined the applicability of service tax under the reverse charge mechanism for services received from the parent company located abroad. The impugned order referred to Rule 2(1)(d)(iv) to justify the tax demand, which was contested by the appellant.

4. The interpretation of Rule 2(1)(d)(iv) of the Service Tax Rules, 2004 was crucial in determining the tax liability of the appellant for the services received from the parent company. The Tribunal analyzed this rule in light of the arguments presented by both parties.

5. The appellant argued that before the enactment of Section 66A, there was no authority to levy service tax on the import of services. Citing judicial precedents, including the judgment of the Hon'ble Supreme Court in Union of India Vs. Indian National Shipowners Association, the appellant contended that the demands confirmed under the taxable category of Business Auxiliary Service for the specified period could not be sustained.

6. The Tribunal considered previous judgments, including those of the Hon'ble Supreme Court and the Hon'ble Bombay High Court, which clarified the authority to levy service tax on the import of services. Relying on these precedents, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant, given the settled position of law regarding the taxability of import of services.

Conclusion:
The Tribunal allowed the appeal in favor of the appellant, setting aside the impugned order confirming the service tax demand. The decision was based on the interpretation of relevant legal provisions, precedents, and the absence of authority to levy service tax on the import of services before the enactment of Section 66A.

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