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2010 (3) TMI 129 - AT - Service TaxDeemed service provider - Business Auxiliary Service - A show cause was issued demanding service tax interest and penalty on the ground that the respondents has incurred Rs.40,66,127/- in foreign exchange towards advertising, publicity and promotion expenses for evaluation of prospective customers situated outside India to M/s. Utmost Foods LCC, Dubai and M/s. LEP International Pvt. Ltd. Australia during the period 2004-05 and 2005-06. The demand was made as service receiver under Rule 2(1)(d) (iv) of Service Tax Rules, 2004 as Business Auxiliary Service provided by a non-resident person providing services to Indian Client. Held that Import of services were not taxable prior to 18-4-2010 Decision in the matter of Foster Wheeler Energy Ltd 2007 -TMI - 1457 - CESTAT, AHMEDABAD and Hindustan Zinc Ltd. reported 2008 -TMI - 30059 - CESTAT-LB and M/s. Anant Spinning. Mills Vs. Commissioner of Central Excise, Bhopal reported in 2009 -TMI - 32814 - CESTAT, NEW DELHI followed decided in favor of assessee
Issues:
1. Liability of service tax on recipient of overseas service prior to 18.4.2006. 2. Interpretation of Rule 2(1)(d)(iv) of Service Tax Rules, 2002. 3. Applicability of Section 66A of the Finance Act, 1994 on service tax liability. 4. Determination of liability for service tax on services received from abroad. 5. Consideration of relevant judicial precedents and circulars in deciding service tax liability. Analysis: 1. The case involved the issue of determining the liability of the recipient of overseas services for service tax prior to 18.4.2006. The respondent argued that prior to the insertion of Section 66A of the Finance Act, 1994, the recipient was not liable to pay service tax. This argument was supported by judicial precedents and a Board Circular clarifying the issue. The Tribunal found merit in this argument and rejected the appeals, citing the decision in Foster Wheeler Engergy Ltd. where similar issues were addressed. 2. The interpretation of Rule 2(1)(d)(iv) of the Service Tax Rules, 2002 was crucial in determining the liability for service tax. The rule specified that in cases where the service provider does not have an office in India, the service recipient is required to pay the service tax. The Tribunal considered this rule in conjunction with the relevant judicial precedents and circulars to reach a decision on the service tax liability of the respondent. 3. The applicability of Section 66A of the Finance Act, 1994 on service tax liability was a key aspect of the case. The insertion of Section 66A in the Finance Act, 1994 had implications on the taxation of offshore services. The Tribunal referred to the amendment brought about by Section 66A and its impact on the liability for service tax on identified offshore services. The decision highlighted that offshore services were liable for tax only after the effective date of the amendment. 4. The determination of liability for service tax on services received from abroad was central to the case. The Tribunal considered the period involved in the present case, which was prior to 18.4.2006, and relied on the decision of the Hon'ble Bombay High Court in the case of Indian National Shipowners Association. The judgment clarified that the recipient of services from outside India was liable for service tax only after 18.4.2006, as confirmed by the Hon'ble Apex Court. 5. In deciding the service tax liability, the Tribunal extensively considered relevant judicial precedents, such as Hindustan Zinc Ltd. and M/s. Anant Spinning Mills, along with Service Tax Circular No. 36/4/01. These precedents and circulars played a crucial role in guiding the Tribunal's decision on the liability of the respondent for service tax. The judgment underscored the importance of legal interpretations and precedents in resolving complex issues related to service tax liability.
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