2013 (12) TMI 499 - HC - Service Tax

Demand of service tax - Service rendered outside India - Notification No.14/2004-ST dated 10.9.2004 - Held that - Foreign Trade Policy 2004-09, on the services rendered outside, the service tax payable thereon, has to be exempted or remitted and considering the fact that the payment, however, will have an adjustable effect through MODVAT Credit, the entire exercise is neutral - Even though the relevance or otherwise of the Notification relied on by the assessee, and the Foreign Trade Policy is a matter for consideration in the appeal filed before the Tribunal, considering the prima facie plea of the assessee that the entire exercise ultimately, would be only revenue neutral and considering the balance of convenience made out by the assessee - Order of Tribunal set aside - stay granted - tribunal directed to decide the issue on merit.

Summary

Issues:
1. Liability to pay service tax on services rendered outside India.
2. Rejection of assessee's contention on limitation.
3. Appeal against the order of the Commissioner.
4. Tribunal's direction for pre-deposit of Rs.9 lakhs.

Analysis:

Issue 1: The assessee contended that services procured from agents outside India did not attract service tax liability as they were not rendered in India. Citing Notification No.14/2004-ST and the Foreign Trade Policy, the assessee argued for exemption. However, the Commissioner held the assessee liable as a service recipient under Section 73(1) of the Finance Act, 1994.

Issue 2: The Commissioner confirmed a service tax demand of Rs.23,91,659 for the period from 18.4.2006 to 28.2.2009. Although the assessee paid Rs.2,30,213 under protest, the Commissioner rejected their limitation defense under the proviso to Section 73 of the Finance Act, 1994.

Issue 3: The assessee appealed to the Commissioner of Customs and Central Excise (Appeals) against the Commissioner's order. The Commissioner upheld the liability but dismissed the appeal on limitation. Both the Revenue's and the assessee's appeals were subsequently dismissed.

Issue 4: The Tribunal directed the assessee to pre-deposit Rs.9 lakhs within eight weeks based on similar cases where 50% pre-deposit was required. The High Court set aside the Tribunal's order, considering the revenue-neutral nature of the exercise and the balance of convenience in favor of the assessee.

In conclusion, the High Court allowed the civil miscellaneous appeal, dispensing with the Rs.9 lakhs pre-deposit ordered by the Tribunal. The Tribunal was directed to proceed with the appeal on merits without the need for the pre-deposit.