2010 (4) TMI 383 - HC - Service Tax

Import of services- the assessee being a foreign company has rendered the services to an Indian Company and service rendered to an Indian Company is liable to pay service tax. Period involved from November, 1998 to December, 2000. words company or firm not included in definition of consulting engineer during material period. Appellant firm not covered even if foreign service provider considered as liable under consulting Engineer Service. Held that- section 66A of Finance Act, 1994 casting liability on recipient on import of services effective from 18.4.2006 and not in force during material period. Service tax liability absent. Question of law answered against revenue.

Summary

Issues:
1. Appeal challenging CESTAT order-in-appeal regarding service tax liability.
2. Interpretation of provisions under Service Tax Act regarding service tax applicability on services rendered by a foreign company to an Indian company.
3. Application of sub-section (31) of Sec. 65 of the Service Tax Act.
4. Impact of Sec. 66A of the Service Tax Act on service tax liability of foreign service providers.

Analysis:
1. The appeal was filed by the revenue challenging the CESTAT order-in-appeal that held services rendered by a foreign company to an Indian company did not attract service tax during the disputed period of November 1998 to December 2000.

2. The main contention was whether the services provided by the foreign company to the Indian company were liable for service tax under the Service Tax Act. The revenue argued that as a consultant engineer, the foreign company was liable to pay service tax based on sub-section (31) of Sec. 65 of the Act.

3. The interpretation of sub-section (31) of Sec. 65 was crucial in determining the liability. The respondent's counsel argued that the provision prior to the amendment by the Finance Act, 2006 did not include a body corporate or firm under the definition of 'Consulting Engineer.' Therefore, the liability could not be imposed on the foreign company.

4. The impact of Sec. 66A of the Act was also considered. The respondent contended that this provision, effective from 18-4-2006, did not apply to the disputed period. The court noted that without the revenue demonstrating the authority to levy service tax on a foreign company during the relevant period, the contentions based on Sec. 66A could not be accepted.

5. Ultimately, the court rejected the revenue's appeal, citing that neither sub-section (31) of Sec. 65 nor Sec. 66A of the Act applied to the foreign service provider during the disputed period. The court also referenced a previous judgment in a related matter involving SKF India Ltd., where similar questions of law were answered against the revenue, leading to the dismissal of the appeal.

This detailed analysis highlights the key legal issues, arguments presented by both parties, and the court's reasoning in arriving at the judgment.