Levy of Service Tax on Service provider from outside India

PJ/Case Laws/2011-12/1531

Case: Commissioner of C. Ex., Kanpur V/s Institut Francais Du Petrole (IFP)

Citation: 2011 (24) S.T.R. 696 (Tri.- Del.)

Issue:- Whether service provided from outside India will be liable for registration or filing of any return?

Brief Facts:- The respondent is a company situated in France and doing its business from France. During the period 2001 to 2002, they provided services of Consulting Engineer to M/s. Gas Authority of India Ltd. in India. Revenue made out a case that the Respondent has to pay Service tax for the services rendered in India and issued show cause notice to the Respondent. The show cause notice was adjudicated by order dated 21-3-2007 confirming tax demand of Rs. 5,52,770/- along with interest. Penalties under Sections 75-A, 76, 77 and 78 were also imposed. The Respondent filed an appeal with the Commissioner (Appeals).

The Commissioner (Appeals) allowed the appeal filed by the Respondent mainly on two grounds. The first ground was that services rendered by the Respondent were under a technology transfer agreement and as such, it should be considered as an intellectual property service and not that of a Consulting Engineer. The second ground was that Commissioner (Appeals) held that the demand was time barred because the matter involved interpretation of law. The Commissioner observed that the Revenue has not adduced any evidence to support wilful suppression of fact with intent to evade payment of Service tax on the part of the respondent. He was of the view that there was no ground for invocation of extended period of time limit for issuing show cause notice.

Appellant’s Contention:- The Department argues that agreement provided for consultation with the Respondent on any problem faced by GAIL relating to the project and also for training the Engineers of GAIL and various other similar services and therefore, the services should have been correctly classifiable under "Consulting Engineer Service". The Department also pleads that since the Respondent did not take out any registration and did not file returns under Section 70 of the Finance Act, the extended period of time can be invoked against the Respondent.

Respondent’s Contention:- The Respondent in reply argues that the Finance Act, 1994 does not extend to any place outside India and since the Respondent is established outside India and they have hardly done any work in India, they are not liable to service tax. They also point out that in the same matter, a show cause notice was issued to Gas Authority of India, the recipient of service and they had paid the tax on the services involved. This submission is not supported by any documentary evidence.

Reasoning of Judgement:- The Tribunal held that Revenue has not explained how the services rendered by the Respondent who is situated abroad are covered under tax levied under Finance Act, 1994. They have not explained how the provision of Section 70 was applicable to the Respondent. Since the Respondent, as a person situated outside India, was not under obligation to take out registration or file any return, the allegation regarding suppression is not maintainable against the Respondent and the appeal is liable to be rejected on this issue itself.

Decision:- Appeal rejected.

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PJ/Case Laws/2011-12/1531

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