2005 (7) TMI 385 - AT - Service Tax

Summary

Issues:
- Liability of the appellants to pay service tax as recipients of services for machinery installation and commissioning imported from a foreign company.

Analysis:
The appeal in question pertains to the issue of whether the appellants, as recipients of services for the installation and commissioning of machinery imported from a foreign company, are liable to pay service tax. The Commissioner (Appeals) had imposed and upheld the service tax on the appellants, considering them as authorized agents of the foreign service provider company. However, it was noted that prior to the amendment of Rule 6 of the Service Tax Rules, the responsibility to pay service tax rested on the service provider or their authorized agent in cases where the service provider was a non-resident of India. The amendment to Rule 6, effective from August 16, 2000, shifted this liability to the recipient of the service. As the case of the appellants predates this amendment, the liability for the disputed period falls on the foreign service provider company, not the appellants.

Upon reviewing the agreement between the appellants and the foreign service provider company, it was observed that there was no clear indication that the appellants were appointed as authorized agents during the relevant period. The Commissioner (Appeals) had based their decision on certain clauses of the agreement, particularly Clause 3.2.4, which outlined the expenses to be borne by the appellants. However, it was determined that these clauses did not establish the appellants as authorized agents responsible for discharging the service liability on behalf of the foreign company. Therefore, it was concluded that the service tax for the disputed period could only be legally recovered from the service provider company or its authorized agents in India, not from the appellants as the recipients of the service.

In light of the above analysis, the impugned order was set aside, and the appeal of the appellants was allowed with consequential relief as per the law. The decision highlights the importance of considering the timing of regulatory amendments and the specific terms of agreements in determining the liability for service tax in cross-border service transactions.