2009 (6) TMI 480 - AT - Service Tax

Services received from outside India- Reverse charges- The assessee, situated in Russia, had entered into an agreement with J Ltd. in India for providing technical assistance by deputing highly qualified specialists. As the assessee had not taken the registration and not paid the service tax liability on the above services, the revenue issued a show cause notice demanding service tax from the assessee under category of consulting engineer for the period of April, 1999 to march 2000. The adjudicating authority and Commissioner (Appeals) confirm the demand. In the light of the decision of Indian National Shipowners Association v. UOI 2009 -TMI - 32013 - HIGH COURT OF BOMBAY, held that- section 66A, was introduced from 18.4.2006, thus no liability to pay service tax before this period thus appeal is allowed.

Summary

Issues:
1. Whether services rendered by the appellant situated beyond India are liable to service tax?
2. Can services be taxed for the period April 1999 to March 2000 when rendered from a foreign country to a person in India?

Analysis:

Issue 1:
The appellant entered an agreement with a company for providing technical assistance by deputing specialists. The appellant did not obtain a registration certificate or pay Service Tax on the services provided. The lower authority confirmed the demand of Service Tax, interest, and imposed penalties. The appellant contended that they only recruited specialists from Russia and CIS countries as per the contract, which could be considered as "supply of manpower" not taxable until 2005. The Circular No. 36/4/2001 clarified that services provided beyond India's territorial waters are not liable for Service Tax. As the appellant was situated abroad and had no office in India, the services provided were not subject to Service Tax.

Issue 2:
The services rendered by the appellant from abroad to a recipient in India during April 1999 to March 2000 were questioned for taxability. The revenue argued that the remuneration paid to the appellant could be considered charges for consulting engineering services. However, the enactment of section 66A in the Finance Act, 1994, mandates that services rendered by a person abroad are taxable in the hands of the recipient. The High Court's judgment in a similar case clarified that before the enactment of section 66A, the tax liability was on the service provider, not the recipient. Therefore, the impugned order demanding Service Tax for the mentioned period was unsustainable and set aside.

In conclusion, the Appellate Tribunal found that the services provided by the appellant from a foreign country beyond India's territorial waters were not liable for Service Tax. Additionally, the services rendered during April 1999 to March 2000 could not be taxed in the hands of the recipient due to the absence of legal provisions at that time. Consequently, the impugned order was set aside, and the appeal was allowed.