2010 (2) TMI 454 - AT - Service Tax

Reverse Charge - The issue involved in this case is regarding the service tax liability on the Technical know-how fees and Royalty charges paid by the appellant during the period 10-9-2004 to 31-12-2005 to their group of companies situated abroad. The lower authorities have come to a conclusion that the service tax liability on the Technical know-how fees and Royalty charges paid by the appellant during the relevant period is liable to service tax liability, on the point of reverse charge mechanism. Held that - in the light of the decision of Indian National Shipowners Association v. Union of India 2009 -TMI - 32013 - HIGH COURT OF BOMBAY, there was no authority vested by law in revenue to levy service tax on a person who is resident in India.

Summary

Issues involved:
Service tax liability on technical know-how fees and royalty charges paid by the appellant to their group of companies abroad during a specific period.

Analysis:
The appeal challenged the Order-in-Original holding the appellant liable for service tax on technical know-how fees and royalty charges paid to foreign companies. The lower authorities concluded the service tax liability falls on the recipient under the reverse charge mechanism. The Adjudicating Authority upheld the demand, citing relevant case laws and amendments to the Service Tax Rules. The appellant argued that service tax liability arises only post a specific amendment in 2006, referencing a Bombay High Court judgment and subsequent Supreme Court dismissal of a related SLP. The JCDR supported the Adjudicating Authority's findings. The Tribunal examined the submissions and records, confirming the appellant's liability for service tax as a recipient of foreign services during the disputed period. Relying on specific rule provisions, the Tribunal noted the statutory obligation on service receivers to pay service tax on services from non-residents without Indian offices.

The appellant's counsel highlighted the settled law post a 2006 amendment, emphasizing the Bombay High Court's judgment and the subsequent Supreme Court dismissal of the SLP. The Tribunal concurred, setting aside the lower order and allowing the appeal based on the established legal position that service tax liability on service recipients commenced post the 2006 amendment. The judgment clarified that service tax demands prior to the specified amendment date cannot be enforced, aligning with the legal principle established by the Bombay High Court and upheld by the Supreme Court's dismissal of the SLP.