Whether service tax payable on import of service prior to 18.4.2006 ?

PJ/CASE LAW/2015-16/2693

Case:- COMMISSIONER OF C. EX. & CUS., NASHIK VERSUSLARSEN & TOUBRO LTD.

Citation:- 2015 (37) S.T.R. 156 (Tri. - Mumbai)

Brief facts:- The appeal arose from Order-in-Appeal No. CEX-XI/JMJ/74/APL/NSK/2005, dated 31-3-2005 passed by the Commissioner of Central Excise & Customs (Appeals), Nashik. The appeal had been filed by the Revenue.
The respondent herein, M/s. Larsen & Toubro Ltd., obtained technical know-how and consultancy from Vetro Pack Ltd., Switzerland and paid royalty on such service received. The department was of the view that the services received was coming under the category of ‘Consultancy Engineering Service’ and the respondent was liable to discharge service tax liability under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994 during the period 15-5-1998 to 30-5-2003. Accordingly, a notice dated 13-10-2003 was issued to the respondent demanding service tax of 22,38,566/- along with interest thereon and also proposing to penalties under the provisions of Finance Act, 1994. The demand notice was adjudicated and the demands were confirmed along with interest any by imposing penalties. The respondent preferred an appeal before the lower appellate authority who vide the impugned order allowed the appeal on the basis of the decisions of this Tribunal in the case of Navinon Ltd. v. Commissioner of Central Excise - 2004 (172)E.L.T.400 = 2006 (3)S.T.R.397 (T); Aviat Chemicals Pvt. Ltd.v. Commissioner of Central Excise - 2004 (170)E.L.T.466 = 2006 (3)S.T.R.291 (T)and Bajaj Auto Limited v. Commissioner of Central Excise -2004-TIOL-970-CESTAT-MUM. = 2006 (3)S.T.R.411 (Tri. - Mum.) = 2005 (179)E.L.T.481 (Tri. - Mum.).Revenue was aggrieved of the same and hence filed appeal.
Appellant’s contention:- The learned Additional Commissioner (AR) appearing for the Revenue submitted that as per Rule 6 of Service Tax Rules, 1994, in case the service was provided by a person who was a non-resident or was from outside India and did not have any office in India, then the service tax thereon shall be paid by such person or on his behalf by persons authorized by him. Since in the present case the respondent had received service he was liable to discharge service tax liability and accordingly he prayed that the appeal be allowed.
Reasoning of judgment:- They carefully considered the submissions. In this case, the transaction was one of supply of technical know-how and payment of royalty thereon. Supply of technical know-how did not fall under the category of ‘Consultancy Engineers Service’ and, therefore, the classifications for levy of service tax adopted was incorrect.
Secondly, the service provider was a foreign company and he had not authorized the respondent to pay service tax on his behalf and, therefore, the service tax liability cannot be fastened on to the appellant as decided by this Tribunal in the case of Navinon Ltd., cited supra.
Thirdly, it was observed that Section 68 read with Rule 6 of the Service Tax Rules, 1994 would apply in the case of a service rendered in India by a non-resident who did not have any office in India. Rendering of service in India was distinct and different from receipt of service in India. In this case, technical know-how had been provided by the foreign service provider. Therefore, the transaction was one of providing of service from abroad and receiving it in India, that was import of service and, therefore, the provisions of Section 68 read with Rule 6 of Service Tax Rules, 1994 did not apply. In the case of service received from abroad, the said activity became taxable w.e.f. 18-4-2006 when Section 66A was inserted in Chapter V of the Finance Act, 1994 enabling the government to levy service tax on reverse charge basis from the service recipient in India in respect of service provided from abroad as held by the Hon’ble Bombay High Court in the case of Indian National Shipowners Association - 2009 (13)S.T.R.235 (Bom.), which was affirmed by the Hon’ble Apex Court [2010 (17)S.T.R.J57 (S.C.)].
In view of the above, they did not find any merit in this appeal and accordingly the same was dismissed.

Decision:- Appeal allowed.

Comment:- The gist of the case is that the liability of service recipient to pay service tax on the import of service under reverse charge mechanism was implemented with effect from 18.04.2006. Therefore, in view of the Supreme Court decision in the case of Indian National Shipowners Association, no service tax can be demanded from service recipient on import of services prior to 18.04.2006.

Prepared by:- Prayushi Jain

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PJ/CASE LAW/2015-16/2693

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