2018 (3) TMI 1000 - AT - Service Tax

Consulting Engineer Service - reverse charge mechanism - Held that - chargeability of service tax on taxable services provided by non-recipient or a person located outside India to a recipient in India on reverse charge basis became payable only after introduction of Section 66A in the Finance Act, 1994 with effect from 18.4.2006 - Since the entire demand in the present case is prior to this date, the demand cannot be upheld - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of the appellant to pay service tax on reverse charge basis for services received under 'Consulting Engineer Service' category.
2. Applicability of Section 66A of the Finance Act, 1994 to determine the chargeability of service tax on services provided by non-recipients located outside India to recipients in India.
3. Impact of judicial precedents on the demand for service tax prior to the introduction of Section 66A.

Analysis:
1. The appellant, engaged in providing taxable services under the 'Consulting Engineer Service' category, received engineering and consulting services along with technical assistance from a foreign entity for setting up air separation plants in India. The Revenue contended that the services fell under the 'Consulting Engineer Services' category, making the appellant liable to pay service tax on a reverse charge basis. An order was passed demanding service tax, interest, and penalties against the appellant, leading to the filing of the present appeal.

2. The Tribunal considered the chargeability of service tax on services provided by non-recipients located outside India to recipients in India on a reverse charge basis. It noted that the liability for such tax arose only after the introduction of Section 66A in the Finance Act, 1994, effective from 18.4.2006. Since the demand in the present case pertained to a period before this date, the Tribunal referred to the decision of the Bombay High Court in the case of Indian National Shipowners Association vs. UOI and the subsequent affirmation by the Supreme Court in the case of CCE vs. Bhandari Hosiery Exports Ltd. Based on these precedents, the Tribunal concluded that the demand for service tax could not be upheld.

3. Considering the legal position established by the aforementioned judicial decisions, the Tribunal set aside the impugned order and allowed the appeal filed by the appellant. The decision was pronounced and dictated in open court on 14/02/2018, providing relief to the appellant in the matter of service tax liability for the services received during the disputed period.