2013 (6) TMI 293 - AT - Service Tax

Service of repair and maintenance - According to the department, the appellant have received these services from the offshore service providers - demand of service tax - Held that - The service of repair and maintenance has been performed wholly abroad and as such, there is no evidence adduced by the department to show that part of the maintenance and repair service had been performed in India. In view of this, so far as this service is concerned, the appellant cannot be said to have received this service in India in terms of the provisions of Rule 3(1) of Taxation of Service provided from outside and received in India Rules, 2006 and as such the service tax demand of ₹ 49.45 crores does not appear to be sustainable. Service of General Sales Agents - On perusal of the relevant clauses of the appellant s agreements with the GSAs appointed in various foreign territories for the services received by them it can be concluded that the services provided by the GSA to the appellant are covered by the definition of business auxiliary service as the GSAs appointed by the appellant not only represent the appellant abroad and provide various services on their behalf they also promote the sales of the services being provided by the appellant by undertaking various sales promotion activities. Since this service has been used by the appellant in India in relation to their business located, in India in terms of the provisions of Rule 3(1)(iii) of the Taxation of Services provided from outside India and received in India) Rules, 2006, this service has to be treated as having been provided from outside India and received in India by the appellant and, therefore, in terms of the provisions of Rule 66A of the Finance Act, 1994 read with Rule 2(1)(d)(iv) of the Taxation Rules, 1994, the appellant as service recipient would be liable to pay service tax on the same. Therefore, service tax demand of ₹ 15.53 crores is on strong footing. As the appellant have pleaded financial hardship stating that the appellant have on huge accumulated losses and are having difficulty in discharging their statutory functions appellant is directed to deposit an amount of ₹ 8 Crores within a period of 8 weeks from the date of this order.

Summary

Issues:
1. Whether the appellant is liable to pay service tax on repair and maintenance services received from offshore service providers.
2. Whether the appellant is liable to pay service tax on services received from General Sales Agents (GSAs).
3. Whether the service tax demand is time-barred.
4. Whether the appellant's financial hardship justifies a waiver from the requirement of pre-deposit.

Issue 1:
The appellant, a Government of India Company, received repair and maintenance services from offshore service providers. The Commissioner imposed a service tax demand of Rs.49.95 crores on the appellant. The appellant argued that since the services were performed abroad and not in India, they should not be taxed under Section 66A of the Finance Act, 1994. The Tribunal found that the services were performed wholly abroad, and there was no evidence of any part being performed in India. Therefore, the service tax demand of Rs.49.95 crores was deemed unsustainable.

Issue 2:
Regarding the service tax demand of Rs.15.53 crores for services provided by General Sales Agents (GSAs), the Tribunal observed that the services fell under the definition of business auxiliary service as per Section 65(19) of the Finance Act, 1994. Since the services were used by the appellant in India for their business, they were liable to pay service tax on these services. The Tribunal found this demand to be on strong footing.

Issue 3:
The appellant contended that the service tax demand for the 2006-2007 period was time-barred as there was no suppression of facts. The Tribunal noted that the question of limitation was a mixed question of fact and law, to be examined during the final hearing.

Issue 4:
The appellant cited financial hardship, stating their significant accumulated losses and difficulty in discharging statutory functions. While financial hardship could be considered for the quantum of pre-deposit, the Tribunal emphasized that the pre-deposit could not be entirely waived when a substantial demand was on strong footing. The Tribunal directed the appellant to deposit Rs.8 crores within 8 weeks, with the balance amount, interest, and penalty waived pending appeal disposal.

This judgment addressed the appellant's liability for service tax on repair and maintenance services from offshore providers and services from GSAs. It also discussed the time-barred nature of the service tax demand and the appellant's financial hardship in relation to the pre-deposit requirement. The Tribunal found the repair service tax demand unsustainable due to services being performed abroad, while the GSA service tax demand was upheld. Financial hardship was considered, leading to a partial waiver of the pre-deposit requirement.