2017 (8) TMI 222 - AT - Service Tax

Reverse Charge mechanism - service received by them from the foreign based service provider - taxability - Held that - For the purpose of levying service tax on the services provided from outside India and received in India, section 66A was enacted wherein Taxation of Services (Provided from outside India and received in India) Rules, 2006 was issued. In the present case the technical testing and analysis was provided wholly in a country outside India, therefore by virtue of Rule 3 clause (ii) the said service is not liable to service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Liability of service tax on service received from foreign-based companies for testing and analysis
- Interpretation of Taxation of Services Rules, 2006 regarding services provided from outside India and received in India
- Application of reverse charge mechanism under Rule 2(i)(d)(4) of Service Tax Rules, 1994

Analysis:
The case involved the appellants, M/s. Total Oil India Ltd., who paid service charges to foreign-based companies for testing and analysis samples without paying service tax under the reverse charge mechanism. Two show-cause notices were issued, confirming the charges. The Commissioner (Appeals) dropped the demand until April 17, 2006, but upheld it from April 18, 2006, onwards. The appellants appealed to the Tribunal, challenging the order.

The appellant's representative argued that since the services were performed outside India, they should not be taxable under the Taxation of Services Rules, 2006. They cited relevant decisions to support their claim. The revenue's representative reiterated the findings of the impugned order.

The Tribunal examined the submissions and found that the testing and analysis services were entirely performed in a foreign country. Referring to Section 66A and Rule 3 of the Taxation of Services Rules, 2006, the Tribunal concluded that services falling under sub-clause (zzh) of Section 65 were not taxable if performed outside India. Citing a previous case involving similar facts, the Tribunal set aside the impugned order and allowed the appeal based on the service being provided outside India.

In conclusion, the Tribunal ruled in favor of the appellants, determining that the technical testing and analysis services provided by foreign-based companies, wholly outside India, were not subject to service tax under the reverse charge mechanism. The decision was based on the interpretation of relevant rules and previous tribunal judgments.