2009 (7) TMI 443 - AT - Service Tax

Liability of recipient in case of import of services contention that liability of the recipient in respect of such service commenced from 18-4-2006 Appellant submits that in respect of the service provided prior to 18-4-06, the amount that is paid after such cut off date shall not bring the appellant to the fold of law for payment of service tax in respect of prior period services. - Apex Court in the case of All India Federation of Tax Practitioner v. UOI reported in 2007 - TMI - 1556 - Supreme Court has categorically brought out that service tax which in turn is VAT is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country, service tax is a value added tax. - Hon ble Court stated that services fall into two category of services. First category is property based while the second category is performance based. Following such rationale, the service already performed before 18-4-06. 18-4-06 may not call for imposition of the tax on the appellant. Stay is granted

Summary

The Appellate Tribunal CESTAT, New Delhi, consisting of Members D.N. Panda and Rakesh Kumar, heard an appeal submitted by Shri Hemant Bajaj, Advocate, representing the Appellant, against a service tax demand of Rs. 13,28,718. The Appellant argued that the service tax demand was made without proper consideration of the law regarding payment of service tax for services provided abroad. The liability of the recipient for such services began on 18-4-2006, and the Commissioner (Appeals) subsequently reduced the service tax demand to Rs. 8,89,754. The Appellant claimed that for services provided prior to 18-4-06, the amount paid after this date should not be subject to service tax. The Appellant had already deposited Rs. 2,77,917 for services performed after 18-4-06, and requested the waiver of the small demand pending appeal. The Departmental Representative supported the orders of the lower authorities.

After hearing both sides and examining the evidence, the Tribunal referred to a Supreme Court judgment stating that service tax is a destination-based consumption tax applicable only to services provided within the country. The Court differentiated between property-based and performance-based services, indicating that services already performed before 18-4-06 may not be subject to tax. Given this legal position, the Tribunal found no need for a pre-deposit since the Appellant had already made a deposit during the appeal process. The order was dictated in open court by Member D.N. Panda.