Service tax liability on foreign consultancy services remained with the receiver where contract terms placed the tax burden on the receiver.

Service tax on consultancy services received from a foreign provider was treated as payable by the service receiver where the contract placed the actual tax burden on the receiver and the provider's role was limited to furnishing notices and supporting documents. Rule 6(1) of the Service Tax Rules, 1994, as applicable before and after amendment, did not shift that liability away from the receiver on these facts. Mere provision of premises within the receiver's building was insufficient to show an independent office of the foreign provider in India. The Tribunal's contrary view was therefore unsustainable.

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Issues: Whether the service receiver was liable to discharge service tax on consultancy services received from a foreign service provider under rule 6(1) of the Service Tax Rules, 1994, and whether the contractual terms and the post-amendment position altered that liability.

Analysis: The service received from the foreign consulting engineer was taxable under the Finance Act, 1994. Under rule 6(1) of the Service Tax Rules, 1994, as it stood prior to 16 August 2002, the tax on services rendered by a non-resident or foreign person without an office in India could be paid by that person or by an authorised person on his behalf. The agreement between the parties placed the responsibility for meeting the actual service tax liability on the service receiver, while the service provider was required to furnish demand notices and supporting documents and was made responsible only for penalty, interest or additional liability arising from non-compliance with tax requirements. The Court also held that the mere provision of premises inside the service receiver's building did not establish an independent office of the foreign company in India so as to displace the receiver's liability.

Conclusion: The service receiver was liable to bear and discharge the service tax liability both before and after the amendment of rule 6(1), and the Tribunal's contrary view was unsustainable.

Ratio Decidendi: Where the contract and surrounding materials show that the service receiver is the person authorised to meet the actual tax burden of a taxable foreign service, the receiver remains liable under rule 6(1), and a mere arrangement of office space does not amount to an office of the foreign service provider in India.

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