Revenue in their memo of appeal have sought to distinguish the Hon’ble Bombay High Court judgment in the case Indian Ship Owners Association vs. UOI, on the ground that in that decision the services were received outside the India, whereas in the present case, the services were received inside the India from the person having his office in India. We do not find any merit in the above distinction being made by the Revenue. Section 66-A having been inserted in the Finance Act with effect from 18.4.2006 clearly laying down that recipient of services in India from outside India shall be liable to pay tax, cannot be made applicable retrospectively. We find no merits in the Revenue’s contention. Accordingly, the appeal is rejected. Stay petition also get disposed off.
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD
Appeal No. ST/325 of 2010
Appeal No. ST/S/931 of 2010
Arising out of Order-in-Appeal No.110/2010(STC)/HKJ/Commr.(A)/Ahd Dated: 26.3.2010
Passed by the Commissioner (Appeals) C.Excise & Cus. Ahmedabad
Date of Decision: 6.4.2011
COMMISSIONER OF SERVICE TAX AHMEDABAD
M/s BOSCH REXROTH (INDIA) LTD
Appellant Rep by: Shri Rajendra Nagar, SDR
Respondet Rep by: None
CORAM: Archana Wadhwa, Member (J)
P Babu, Member (T)
Per: Archana Wadhwa:
Being aggrieved with the order passed by Commissioner (Appeals), Revenue has filed the present appeal along with stay petition. Inasmuch as the issue involved stands covered by the earlier decision of the Tribunal, we after rejecting the stay petition filed by the Revenue proceed to decide the appeal itself.
2. As per facts on record, the respondents are engaged in providing the services under the category of ‘Maintenance & Repair Service, Commercial Training & Coaching, Erection, Commissioning & Installation Service, Goods Transport Agency Services and Intellectual Property Service’ and hold service tax registration.
3. During the course of audit of the said service provider by CERA, it was observed that during the period 2003 and 2004, the service provider had incurred expenditure in foreign currency towards “Service charges” amounting to Rs.6,37,350/- and Rs.14,24,007/- respectively. The service provider accepted the point raised by CERA in respect of Rs.6,37,350/- during 2003 and deposited service tax along with interest. In respect of Rs.14,24,007/- during the year 2004, the service provider deposited service tax along with interest on Rs.7,39,101/- but did not pay service tax on the balance amount of Rs.6,84,906/- on the ground that an amount of Rs.6,50,826/- (Euro 11574) pertains to flight cost, hotel cost and instruction charges reimbursed to M/s. Rexroth Bosch Group, Germany towards traveling, lodging expenses and instruction charges during the visit of the stay of the personnel of M/s. Rexroth Bosch Group, Germany in relation to presentation at Jamshedpur and Rs.34,080/- (USD750) for engineering review of drawings raised on them by M/s. ABS Singapore. However, it was found that these expenses were reimbursed/ incurred in relation to ‘Online information and database access or retrieval service” and hence were liable to service tax. Thus, it was found that the said service provider had not paid service tax of Rs.54,792/- on the amount of Rs.6,84,906/- under the category of “Online information and database access or retrieval service” which was brought into the ambit of service tax with effect from 16.7.2001. Further, as per Rule 2(d) (iv) of the Service Tax Rules, 1994, if the service provider happens to be non-resident of India or from outside India and does not have any office in India, the person receiving taxable service in India is liable to pay service tax from 16.8.2002. Since the service provider had not paid the said amount of service tax the same was required to be recovered under Section 73(1) of the Finance Act, 1994.
4. Therefore, a show cause notice was issued to the said service provider on 06.11.2008 which culminated into an order passed by the original adjudicating authority confirming demand of Rs.54,792/- under Section 73(1) of the Finance Act, 1994 along with interest and imposition of penalties under sections 76,77 and 78 of the Finance Act, 1994.
5. On an appeal against the above order of the adjudicating authority, respondents filed an appeal there against before the Commissioner (Appeals), who by following the Hon’ble Bombay High Court decision held in favour of the respondents. For better appreciation, Para 7 of the Commissioner (Appeals) order is reproduced below :-
“7. From the impugned order it is clear that the amount in question was paid by the appellants to the service provider who was a non-resident or from outside India and does not have any office in India hence the appellants who are receiver of services were liable to pay service tax in terms of Rule 2(d) (iv) of the Service Tax Rules, 1994. The main issue in this case is whether the services provided from outside India and received in India were taxable prior to insertion of Section 66-A with effect from 18.4.2006 or otherwise. The appellants during the course of personal hearing have cited the judgment in case of Indian Ship Owner Association vs. UOI wherein the Hon’ble Supreme Court of India had dismissed the petition filed by Central Government challenging the order of the Hon’ble Bombay High Court. The Hon’ble Bombay High Court – 2009 (13) STR-235 (Bom) = 2008-IST-23-HC-MUM-ST in the said order had held that, “it appears that it is first time when the Act was amended and Section 66A was inserted by Finance Act, 2006 with effect from 18.4.2006, the respondents got legal authority to levy service tax on the recipients of the taxable service. Now, because of the enactment of Section 66A, a person who is resident in India or business in India becomes liable to be levied service tax when he receives service outside India from a person who is non-resident or is from outside India. Before enactment of Section 66A it is apparent that there was no authority vested by law in the respondents to levy service tax on a person who is resident in India, but who received services outside India. In that case till Section 66-A was enacted a person liable was the one who rendered the services. In other words, it is only after enactment of Section 66-A that taxable services received from abroad by a person belonging to India are taxed in the hand of the Indian residents. In such case, the Indian recipient of taxable services is deemed to be a service provider. Before enactment of Section 66-A, there was no such provision in the Act and therefore, the respondents had no authority to levy Service Tax on the member of the petitioners-association. “Thus in view of the above decision of the Hon’ble Bombay High Court it becomes clear that reverse charge tax shift, mechanism operating under Rule 2(1) (d) (iv) of the Service Tax Rules, 1994 read with Section 66-A of the Finance Act, 1994, is effective only from 18.4.2006. Therefore, the demand of service tax with interest for the period prior to 18.4.2006 under Reverse Charge or Tax Shift mechanism is not applicable. The service in this case has been rendered in 2004 and hence the appellants were not liable to pay service tax. When the demand of Service Tax is not sustainable there in no question of imposing any penalty and charging of any interest.”
6. Revenue in their memo of appeal have sought to distinguish the Hon’ble Bombay High Court judgment in the case Indian Ship Owners Association vs. UOI, on the ground that in that decision the services were received outside the India, whereas in the present case, the services were received inside the India from the person having his office in India. We do not find any merit in the above distinction being made by the Revenue. Section 66-A having been inserted in the Finance Act with effect from 18.4.2006 clearly laying down that recipient of services in India from outside India shall be liable to pay tax, cannot be made applicable retrospectively. We find no merits in the Revenue’s contention. Accordingly, the appeal is rejected. Stay petition also get disposed off.
(Dictated and pronounced in the Court)