2016 (5) TMI 307 - AT - Service Tax

Liability of Service tax - Reverse Charge Mechanism - Business Auxiliary Services - Section 65(19) of the Finance Act, 1994 - Appellant engaged in the business of promoting, marketing, canvassing, procuring orders from various customers in India for the medical equipments manufactured by M/s Viasys International Corporation and also carrying after sales service - Amount received as commission in convertible foreign exchange. Held that - the issue is no more res integra as the service is rendered by the appellant on the goods which was manufactured by overseas manufacturer. It would mean the services rendered by the appellant is to an overseas manufacturer on whom Service Tax liability does not arise. The service rendered to such a person situated based at overseas Service Tax liability arises on him but under reverse charge mechanism appellant is made liable to pay, however in this services are consumed by a person not in India, no Service Tax liabilities arises on appellant is the law settled which is supported by judgement of Hon ble Bombay High Court in the case of CST Vs. SGS India Pvt. Ltd. 2014 (5) TMI 105 - BOMBAY HIGH COURT . Therefore, the impugned order is unsustainable and liable to be set aside. - Decided in favour of appellant

Summary

Issues involved:
Whether the appellant is liable for Service Tax under Business Auxiliary Services as per Section 65(19) of the Finance Act, 1994.

Analysis:
The appeal was against an Order-in-Original passed by the Commissioner of Service Tax, Mumbai-II. The appellant's business involved promoting, marketing, and providing after-sales services for medical equipment manufactured by an overseas company. The Revenue claimed Service Tax under Reverse Charge Mechanism on the commission received by the appellant. The lower authority upheld the demand, interest, and penalties. The appellant argued that similar activities were held non-taxable in previous judgments and cited relevant case laws to support their position.

The Tribunal examined the nature of services provided by the appellant and the commission received in convertible foreign exchange. It was noted that the services were rendered on goods manufactured overseas, making the overseas manufacturer the recipient of the services. As per established law and supported by the judgment of the Hon'ble Bombay High Court, no Service Tax liability arises when services are consumed by a person outside India. The Tribunal referenced circulars and previous decisions to support its conclusion that services consumed abroad do not attract Service Tax liability.

The Tribunal found that the appellant's services were consumed abroad by foreign clients, making it an "export of service" not subject to Service Tax. This view was consistent with the principle that Service Tax is a destination-based consumption tax applicable only to services provided within the country. The Tribunal set aside the impugned order, citing the precedent set by the Hon'ble Supreme Court and the majority decision of the Tribunal in a similar case involving Microsoft Corporation. The appeal was allowed, and the impugned order was deemed unsustainable.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the services provided to foreign clients did not attract Service Tax liability under Business Auxiliary Services. The decision was based on established legal principles, relevant case laws, and the destination-based nature of Service Tax as a consumption tax.