2010 (6) TMI 79 - AT - Service Tax

Import of service period prior to 18.4.2006 Held that - Having no dispute that the appellant availed service of foreign consultant and the duty liability of the appellant is after a notified date, the appeal of the appellant is allowed for no evidence of service tax collected, on record. We make it clear that when there was no liability declaration by law at the relevant point of time, mere consent of parties by an agreement shall not create a liability

Summary

Issues: Recovery of service tax from appellant for services provided by foreign consultant prior to a notified date.

Analysis:
1. The dispute revolves around the recovery of service tax from the appellant for services provided by a foreign consultant before a notified date. The Revenue claims that the appellant agreed to pay the service tax liability as per an agreement, citing a decision of the Hon'ble Supreme Court. However, the appellant relies on a different judgment by the Hon'ble Supreme Court which negates the Revenue's proposition. The appellate tribunal notes the conflicting judgments and arguments presented by both sides.

2. The adjudication pertains to the period of 1999-2000 and 2000-01 when consultancy services were provided by a foreign consultant to the Indian appellant as per an agreement. The appellant was required to collect service tax from the foreign company and remit it to the government as per the terms of the agreement. A service tax demand of Rs. 1,40,833/- was raised for the mentioned period based on payments made to the foreign consultant. However, the record does not indicate whether the appellant actually collected any service tax from the service provider. The tribunal considers the latest judgment of the Hon'ble Supreme Court in the Indian National Shipowners Association case, which determined the liability and realisability of service tax from the recipient only after a specific date. Given that the impugned period in this case predates the relevant date, the tribunal finds no basis for imposing the tax liability on the appellant, especially in the absence of evidence of service tax collection by the appellant.

3. The tribunal allows the appeal of the appellant, emphasizing that in the absence of a legal declaration of liability at the relevant time, a mere agreement between parties does not create a tax liability. The decision highlights the importance of legal provisions and clarity in determining tax liabilities, especially in cases where the law itself did not mandate the collection of service tax during the period in question. The tribunal's ruling underscores the principle that liability cannot be imposed solely based on a contractual agreement when there was no legal obligation in place at the relevant time.

This comprehensive analysis of the judgment provides a detailed insight into the issues involved and the tribunal's reasoning behind allowing the appellant's appeal in the matter of service tax recovery from a foreign consultant.