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TMI Blog2007 (4) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax under the contract/work orders. Since the services were received prior to 16-8-2002, even though it (Grasim) may not have been directly liable to pay the Service tax at that relevant time, as a recipient it was liable, in view of the contract by which it had undertaken the liability to pay the tax which was payable by the service provider. In all these appeals filed by the Revenue, recipient of service, who, according to the Revenue, had undertaken the liability to pay Service tax, is the respondent. 3. Service Tax Appeal Nos. 159 to 163 of 2005 have been filed by Calvin Wooding Consulting Ltd., Lenzing Aktiengeseooschaft, List AG, Jenewin Partner, and Eurafrica S.A., against the orders of the Commissioner (Appeals) under which the liability of the service providers to pay the Service tax was upheld and penalties imposed by the original authority were confirmed. All these appellants were service providers stationed abroad and engaged by the Indian party (Grasim) for receiving their service in India. 4. The main dispute centers around the liability to pay the Service tax and penalty. On behalf of the appellants - service providers, it has been argued that, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the category of 'Consulting Engineer', and that it was received in India. Both the sides, after verifying the record have stated that, the service in this matter was in the nature of manpower recruitment which falls under Section 65(65) of the Act. Thus, there is no dispute, at this stage, about the nature of services which were rendered. The main dispute is, whether there was any liability on the part of the service provider to pay the tax and penalty, and equally, whether the recipient of service could be held liable for such tax and penalty, in view of the fact that the recipients were not liable in such cases prior to 16-8-2002. 7. In the order of the Commissioner (Appeals), which is challenged in Service Tax Appeal No. 161 of 2005 and Service Tax Appeal No. 169 of 2005, it was found that, under the contract between the service provider and the recipient for supervision of chemical start-up under Consulting Engineer Services for the period from April, 1999 to March, 2000, and April, 2000 to March, 2001, it was specifically mentioned in Clause 4(b) that, taxes and duties payable in India shall be borne by Grasim. The adjudicating authority had found that, the recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected in the order which was made on 11-5-1998 (Annexure 'A' to the show cause notice), but there was no specific clause relating to deduction/payment of tax in respect of the said transaction. However, as per the debit advise of the Bank (Annexure 'C') TDS @ 20% appears to have been deducted and deposited by the service recipient from the amount which was payable to the service provider. 9. The Commissioner (Appeals), whose order is challenged in Service Tax Appeal Nos. 159 and 171 of 2005, while holding similar view to the effect that recipient of service was not liable, upheld the liability of the service provider for rendering service as 'Consultant Engineer'. He, therefore, confirmed the demand of service tax of Rs. 12,954/- against the service provider, original noticee no. 1 (who is the appellant in Service Tax Appeal No. 159 of 2005), to the effect that the service provider was liable to pay tax under Section 73 and imposed a penalty of the like amount. Admittedly, there was no clause in the contract, which was the subject-matter of these matters regarding the liability to deduct/pay taxes. It was ordered by the adjudicating authority that, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecipient of service was not liable, upheld the liability of the service provider for rendering service as 'Consultant Engineer'. He, therefore, confirmed the demand of service tax of Rs. 47,030/- against the service provider, original noticee no. I (who is the appellant in Service Tax Appeal No. 163 of 2005), to the effect that the service provider was liable to pay tax under Section 68 and imposed a penalty of the like amount. Admittedly, there was no clause, in the contract which was the subject-matter of these matters, regarding the liability to deduct/pay taxes. It was ordered by the adjudicating authority that, the amount was recoverable from the service receiver, who was the original noticee no. 2 (who is the respondent in Service Tax Appeal No. 173 of 2005). The Appellate Commissioner, however, while confirming the liability of the service provider (appellant in Service Tax Appeal No. 163 of 2005), set aside the order of recovery of tax and penalty made against the noticee no. 2, Grasim (who is the respondent in Service Tax Appeal No. 173 of 2005). 12. in the background of the above facts, it has been contended on behalf of the appellant - service providers, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability to pay tax, was required to be explicit, and even clause 4(b) of the Contract, which is the subject-matter of Service Tax Appeal Nos. 169 and 161 of 2005, was not an express authorization for payment of Service tax. He supported the reasoning of the Commissioner (Appeals) to the extent the orders-in-original against the services recipient are set-aside, and challenged the order of the Commissioner (Appeals) to the extent it upheld the liability of the service providers as adjudicated upon in the orders- in-original. 13. The learned authorised representative for the Department strongly contended that, service providers were liable to pay tax by virtue of the third proviso to Rule 4 and the second proviso to Rule 6 of the Service Tax Rules for the period prior to the amendment made on 16-8-2002. He argued that the service recipient was authorised to pay tax as per the terms of the contracts, which are the subject-matter of Service Tax Appeal Nos. 169 and 161 of 2005 and Service Tax Appeal Nos. 172 and 162 of 2005. It was submitted that, even prior to 16-8- 2002, the authorized person was liable to pay tax under the said Rules 4 and 6 when the service provider was a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice tax due on the service rendered by him should be paid by such person or on his behalf by another person authorized by him, who should submit to the Commissioner of Central Excise, in whose jurisdiction the taxable services had been rendered, a return containing specific details with necessary enclosures. He further relied upon the decision of this Tribunal in Indian Farmers Fertilizers Co-op Ltd. v. CCE, Bareilly (UP) reported in 2007 (5) S.T.R. 281 (T-Del.), pointing out from Para 17 of the judgment that, it was held in the context of the despatch of the designs etc. from abroad that, though the technical information in the form of drawings, designs as goods was despatched from abroad, the technical assistance which was agreed to be provided was to be rendered obviously in India at the plants of the assessee and that no technical assistance was to be rendered or could be considered to have been rendered at the place from where the post was despatched from abroad. He then, relied upon the decision of the Tribunal in Jindal Steel Power Ltd. v. Commissioner of Central Excise, Raipur reported in 2006 (3) S.T.R. 481, pointing out from Paragraph 11.1 of the judgment that, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal, that the services rendered were provided to Grasim Industries Ltd. in India. In the statement of facts in all the appeal memos of the service provider, it is stated as follows: The service provider, provided services as a Consulting Engineer, as de fined under Section 65(25) of the Finance Act, 1994, as existed at the relevant time, to M/s. Grasim Industries Ltd., Staple Fibre Division, Birlagram, Nagda - 456 331 (M.P.) and hereinafter referred to as, the Service Enjoyer. Again in all these appeal memos in the Grounds of Appeal, it has been specifically stated as under: It is manifestly clear that the services were received by M/s. Grasim Industries Ltd., in India. 15. The contention of the learned Counsel was that, these service providers were foreigners and that they cannot be held liable to pay service tax under the Indian law. In this context, we may refer to Section 66, which provides that, there shall be levied Service tax at the rate mentioned therein of the value of the taxable services, referred to therein, which shall be collected in the manner as may be prescribed by the Rules. By Section 68 of the Act, it is provided that, every person providi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n who is a non-resident or is from outside India, does not have any office in India and is liable to pay service tax on taxable services provided in India (i) the service tax thereon shall be paid by such person or on his behalf by any other person authorized by him, who shall submit to the Commissioner of Central Excise in whose jurisdiction the taxable services have been rendered, a return, containing the following details, . [Emphasis Added] 17. From the above provisions, it is clear that, a non-resident service provider, if he pays Service tax on such taxable services rendered by him under Rule 6, he need not apply for registration. This postulates that, every foreign service provider who renders taxable service to any person in India, would be liable to pay Service tax, and that if he chose himself to pay it, he need not apply for registration. The second proviso to Rule 6(1) also contemplates that, a non-resident service provider who is liable to pay the service tax on taxable service provided in India, may pay such tax himself or he may authorize any other person to pay the same. If any other person is authorised by such foreign service provider, who is liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that, the authorities below were fully justified in holding that, all these service providers, who are the appellants in Service Tax Appeal Nos. 159 to 163 of 2005, were liable to pay Service tax and penalty. All these appeals are, therefore, liable to be dismissed. 19. In the cluster of appeals filed by the Revenue, namely, Service Tax Appeal Nos. 169 to 173 of 2005, only in two appeals, namely, Service Tax Appeal Nos. 169 172 of 2005, clauses for tax payment were incorporated in the contracts and in none of the other appeals, the contract included such clauses. The clauses, relied upon in the contract, which were the subject-matter of Service Tax Appeal Nos. 169 and 172 of 2005, were in the following words : 4. PRICE BASIS : (a) The price for equipment (duly packed in seaworthy conditions) is on FOB North Sea Port, according to INCOTERMS 1990. The price is FIRM and not subject to any escalation. (b) Taxes and duties, if any, payable in Switzerland/outside India shall be borne by LIST, Taxes and duties payable in India shall be borne by GRASIM Industries Limited (GRASIM). 4. PAYMENTS : Grasim shall be responsible for all compliances requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 and 173 of 2005, it is not disputed that, there was no such tax deduction/payment clause authorizing the respondent therein, original noticee no. 2, to pay service tax, which was payable by the foreign service provider in respect of taxable service, which was provided in India to Grasim. In the absence of any such authorization, which would have created a liability under the second proviso to Rule 6(1) to file the return and deposit the tax, the respondent in these appeals cannot be saddled with an obligation to pay service tax on behalf of a foreign service provider. 21. The liability of the recipient cannot arise merely from the fact that, the income-tax was deducted at source, which was the requirement of the Income-tax Act, on the recipient who made payment to the foreign supplier. Such a statutory requirement, as exists under the Income-tax law on the person making the payment to deduct tax at source, as a tax collecting agency of the Revenue, does not exist under the provisions of the Service Tax law, and no obligation was cast upon the recipient of the service to make any deduction from the amounts payable by way of consideration, under the statutory provisions. Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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