2010 (5) TMI 179 - AT - Service Tax

Import of Services - appellant were receiving services from people who are situated abroad under the categories of Consulting engineer service, repair and maintenance service, commercial training and coaching services, computer network services Held that - up to 18/4/2006, the service tax liability cannot be fastened upon the appellant as the recipient of the services as the law is settled by the Hon ble High Court of Bombay in the case of Indian National Shipowners Association. regarding post 18/4/2006 - first services which are received by the appellant needs to be classified and benefits in accordance with law needs to be extended to them. On perusal of the entire Order-in-Original , we find that there is no classification of the services which have been received by the appellant and the entire demand has proceeded on the presumption that all the services which are received by the appellant are taxable as the recipient. - , for the period post 18/4/2006, matter remanded back

Summary

Issues involved:
- Liability of service tax on the appellant for services received from abroad.
- Applicability of service tax rules from 1/10/2002 to 31/3/2007.
- Interpretation of Rule 2(1)(d)(iv) of Services Tax Rules, 1994.
- Effect of judgments by various courts on service tax liability.
- Classification of services received by the appellant post 18/4/2006.

Analysis:

1. Liability of service tax on the appellant for services received from abroad:
The issue revolved around whether the appellant, receiving services from a non-resident individual, is liable to pay service tax. The lower authorities demanded service tax, interest, and penalties from the appellant under the Service Tax Rules, 1994. The appellant contested this demand, arguing that the liability to pay service tax as a recipient of services from abroad was introduced into the Finance Act only from 18/4/2006 onwards.

2. Applicability of service tax rules from 1/10/2002 to 31/3/2007:
The period in question was from 1/10/2002 to 31/3/2007. The appellant claimed that until 18/4/2006, the liability for service tax as a recipient of services from abroad was not applicable based on judgments by the Hon'ble Bombay High Court and the subsequent dismissal of the SLP by the Hon'ble Supreme Court. The appellant relied on a series of decisions supporting their position.

3. Interpretation of Rule 2(1)(d)(iv) of Services Tax Rules, 1994:
The interpretation of Rule 2(1)(d)(iv) of the Services Tax Rules, 1994 was crucial in determining the liability of the appellant for service tax. The appellant argued that post 18/4/2006, the lower authorities should have classified the services received to ascertain the correct service tax liability.

4. Effect of judgments by various courts on service tax liability:
The judgments by different courts, including the Hon'ble High Court of Bombay and subsequent decisions, played a significant role in establishing the legal position regarding the liability of the appellant for service tax. The judgments clarified the legal authority to levy service tax on recipients of services from abroad.

5. Classification of services received by the appellant post 18/4/2006:
The issue post 18/4/2006 involved the classification of services received by the appellant to determine the correct service tax liability. The appellant emphasized the necessity of classifying the services before imposing any tax liability, as different categories of services may have varied tax implications.

In conclusion, the appellate tribunal set aside the demand of service tax, interest, and penalties for the period prior to 18/4/2006, based on settled legal principles. For the period post 18/4/2006, the tribunal remanded the matter to the adjudicating authority for proper classification of services received by the appellant to determine the correct service tax liability in accordance with the law and principles of natural justice.