2017 (7) TMI 652 - HC - Service Tax

Refund claim - time limitation - duty paid under protest - reverse charge - whether time limitation of 1 year is applicable to duty paid under protest? - Held that - the first appellate authority was correct in coming to the conclusion that service tax liability arises on the respondents herein only, if the said amounts were paid post 18/04/2006 - reliance place on the judgment of the Hon ble Bombay High Court in the case of Indian National Shipowners Assocaition 2009 (3) TMI 29 - BOMBAY HIGH COURT is correct as this judgment of the Hon ble High Court of Bombay has been upheld by the apex court and based upon such decision, Board has also issued circular No.276/8/2009-CX.8A dt. 26/09/2011 stating that service tax liability for the payments made to an overseas service provider will arise from 18/04/2006 only - refund allowed - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Interpretation of service tax liability on commission paid to overseas agents.
2. Applicability of service tax provisions on services rendered outside India.
3. Validity of refund claims for service tax paid under protest.
4. Interpretation of relevant notifications and circulars in relation to service tax liability.

Analysis:

Issue 1: Interpretation of service tax liability on commission paid to overseas agents
The appeals were filed by the Revenue against the Order-in-Appeal, challenging the decision of the first appellate authority that service tax liability did not arise on the commission paid to overseas agents for selling goods. The Revenue argued that service tax liability arises when the service provider is situated abroad, and the service recipient is in India. The Revenue contended that since the respondents paid commission to the overseas service provider for selling goods, service tax liability should apply. However, the Tribunal found that the first appellate authority's decision was correct. The Tribunal held that service tax liability would only arise if the amounts were paid post 18/04/2006, based on the judgment of the Hon'ble Bombay High Court and circulars issued by the Board.

Issue 2: Applicability of service tax provisions on services rendered outside India
The respondents, manufacturers and exporters of cotton yarn, utilized services of overseas agents for selling goods in foreign countries. The respondents believed that no service tax was payable on these services as they were rendered outside India. However, they started discharging service tax under protest. The Tribunal noted that the law at the relevant time required service tax liability as a service recipient from a service provider situated abroad to arise only from 18/04/2006. The Tribunal found that the respondents' interpretation was correct and upheld the decision of the first appellate authority.

Issue 3: Validity of refund claims for service tax paid under protest
The respondents filed refund claims for the service tax paid under protest, arguing that the time limit of one year did not apply to duty paid under protest. The original authority rejected the refund claims, leading to appeals before the Commissioner (A). The first appellate authority allowed the appeals, relying on the decision of the Hon'ble High Court of Bombay. The Tribunal upheld the decision of the first appellate authority, stating that the service tax liability only arose post 18/04/2006, and the refund claims were valid.

Issue 4: Interpretation of relevant notifications and circulars in relation to service tax liability
The Revenue contended that notification No.36/2004 and subsequent provisions applied to establish service tax liability on the commission paid to overseas agents. However, the Tribunal found that the impugned orders were legal and correct. The Tribunal noted that the notification was issued without corresponding provisions in the Finance Act, 1994 until 18/04/2006. Therefore, the Tribunal upheld the impugned orders, rejecting the appeals and disposing of cross objections.

In conclusion, the Tribunal upheld the decision of the first appellate authority, ruling that service tax liability on commission paid to overseas agents only arises post 18/04/2006 and that the refund claims for service tax paid under protest were valid. The Tribunal found that the relevant notifications and circulars supported this interpretation, leading to the rejection of the Revenue's appeals.