2008 (8) TMI 51 - AT - Service Tax

Held that Appellants are liable to pay the service tax on the Architectural consultancy service received by them from M/s Callison, U.S.A. for period from 01/1/05 onwards and that for recovery of non- paid service tax, longer limitation period under proviso to Section 73 (1) has been rightly invoked and they are liable for penalty u/s 76 & 78 matter is remanded to the Commissioner for quantification of service tax demand & penalty u/s 78 - penalty of Rs. 100/- per day u/s 76 is upheld

Issues Involved:
1. Definition of "Architect" under Section 65(6) of the Finance Act, 1994.
2. Liability to pay service tax on services received from an offshore service provider.
3. Applicability of extended period of limitation under Section 73(1) of the Finance Act, 1994.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Definition of "Architect" under Section 65(6) of the Finance Act, 1994:
The primary dispute was whether M/s Callison, USA, qualifies as an "architect" as defined under Section 65(6) of the Finance Act, 1994. The appellants argued that M/s Callison was not registered in the register of architects maintained under Section 23 of the Architects Act, 1972, and hence, was not an architect within the meaning of the term. However, the Tribunal noted that the definition of "architect" under Section 65(6) includes any commercial concern engaged in rendering services in the field of architecture, directly or indirectly. Since M/s Callison is a commercial concern engaged in architectural services, it falls under the second part of the definition and is thus considered an architect. Consequently, the services provided by M/s Callison to the appellants are taxable under Section 65(105)(p) of the Act.

2. Liability to pay service tax on services received from an offshore service provider:
The appellants contended that since M/s Callison, USA, did not have any office or business establishment in India, they were not liable to pay service tax on the services received. They also argued that Section 66A, which provides for the levy of service tax on import of services, came into effect only from 18/4/2006. The Tribunal disagreed, stating that the charging Section 66 and the definition of taxable service under Section 65(105) do not specify the nationality or resident status of the service provider. Thus, services provided by a non-resident or foreigner in India were taxable even before the introduction of Section 66A. Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, effective from 16/8/2002, made the recipient of the service in India liable to pay the service tax. However, the Tribunal noted that the liability of the service recipient to pay service tax was explicitly clarified only from 01/1/2005 onwards, following Notification No. 36/04-ST dated 31/12/2004.

3. Applicability of extended period of limitation under Section 73(1) of the Finance Act, 1994:
The appellants argued that the extended period of limitation should not be invoked as there was no suppression or intention to evade tax, and they were under a bona fide belief, due to conflicting judgments, that they were not liable to pay service tax. The Tribunal found that the appellants had taken registration under various service categories but had not disclosed the receipt of architectural consultancy services from foreign consultants in their ST-3 returns. The Department became aware of the non-payment of service tax only after initiating an inquiry in October 2005. Therefore, the Tribunal held that the appellants were guilty of willful suppression of relevant information, justifying the invocation of the extended period of limitation under Section 73(1).

4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The Tribunal upheld the penalties imposed under Sections 76 and 78 of the Finance Act, 1994, due to the appellants' failure to disclose relevant information and pay the service tax. However, the quantum of the penalty under Section 78 needed to be redetermined in light of the reduced tax liability. The penalty of Rs. 100 per day under Section 76 was upheld.

Conclusion:
The Tribunal concluded that the appellants were liable to pay service tax on the architectural consultancy services received from M/s Callison, USA, for the period from 01/1/2005 onwards. The extended period of limitation was rightly invoked, and penalties under Sections 76 and 78 were justified. The matter was remanded to the Commissioner for quantification of the service tax demand and redetermination of the penalty under Section 78. The appeal was disposed of accordingly.

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