2009 (8) TMI 173 - AT - Service Tax

Liability of recipient in case of import of service - appellants in this case have been charged with non-payment of service tax liability and were alleged to have been evading service tax on the services received under the category of Intellectual Property Services and under the category of Business Auxiliary Services received from foreign nationals - The period of dispute is from 10-9-04 to 31-3-06 - The issue involved in this case is whether during the relevant period the recipient of the service is liable to be imposed with service tax only on the ground that service provider is a non-resident and is a person who is situated outside India. We find that this issue is no more res-integra as the issue has been settled by the Hon ble High Court of Bombay in the case of Indian National Shipowners Association 2009 - TMI - 32013 - HIGH COURT OF BOMBAY holding recipient as liable from 18-4-2006 - The appeal is allowed

Summary

Issues Involved:
Non-payment of service tax liability for "Intellectual Property Services" and "Business Auxiliary Services" by the appellants during specific periods.

Detailed Analysis:

1. Service Tax Liability Issue:
The main issue in this case revolves around the liability of the recipient of services to pay service tax, particularly when the service provider is a non-resident or situated outside India. The appellants were charged with non-payment of service tax for services received under "Intellectual Property Services" and "Business Auxiliary Services." The adjudicating authority held the appellants liable for service tax under Service Tax Rules, 1994, based on the contention that as service providers were non-resident or from outside India, the service tax liability needed to be discharged by the service receiver. The appellants contested this before the Adjudicating Authority, which confirmed the duty liability, penalties, and interest. The central question was whether the recipient of the service is liable to pay service tax solely because the service provider is a non-resident or situated outside India.

2. Legal Precedents and Arguments:
The appellants argued that the service tax liability on the recipient should only arise from a specific date when relevant provisions came into effect. They cited judgments from the Hon'ble High Court of Bombay and the Tribunal to support their contention. On the other hand, the SDR argued that the services received fell under taxable categories, such as intellectual property rights and business auxiliary services, and the liability should be discharged by the appellants accordingly.

3. Judicial Interpretation and Decision:
The Tribunal analyzed the legal provisions and referred to the judgment of the Hon'ble High Court of Bombay in a similar case, where it was held that the service tax liability cannot be levied on the recipients based on certain rules. Additionally, the Tribunal noted a judgment by the Hon'ble High Court of Delhi, which supported the appellants' position regarding the commencement of service tax liability for the recipient. Considering the legal precedents and the specific dates mentioned in the judgments, the Tribunal concluded that the service tax liability on the recipient would arise only from a later date, as established by the higher courts. Therefore, the impugned orders were set aside, and both appeals were allowed with consequential relief, if any.

This detailed analysis of the judgment highlights the legal intricacies involved in determining the liability of the recipient for service tax in cases where the service provider is a non-resident or situated outside India. The Tribunal's decision was guided by legal precedents and specific provisions, ultimately providing relief to the appellants based on the established legal principles.