Appellants win service tax dispute on payments to foreign consultants

The Tribunal ruled in favor of the appellants, stating they were not liable to pay service tax on payments to foreign consultants for services received between 2003 to 2005. The decision was based on the interpretation of Rule 2(1)(d)(iv) of the Service Tax Rules, following precedents from the Bombay High Court and the Apex Court. The Tribunal set aside the service tax demand and allowed the appeal with consequential relief.

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Issues:
Service tax demand on payment made to foreign consultants for the period 2003 to 2005.

Analysis:

Issue 1: Service Tax Liability on Payment to Foreign Consultants

The appellants were facing a service tax demand for the payment made to foreign consultants between 2003 to 2005. The case revolved around the interpretation of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, which states that a person receiving taxable services in India from a non-resident or a person from outside India without an office in India is liable to pay service tax on such payments. The appellants had paid a significant amount in foreign currency to a foreign consultant for trademark and patent registration during the mentioned period.

Analysis: The Tribunal examined the legal position based on the decision of the Hon'ble Bombay High Court in the case of Indian National Shipowners Association, which was upheld by the Hon'ble Apex Court. The key finding was that service tax was not leviable on the petitioner prior to 18-4-2006 under Rule 2(1)(d)(iv). Since the appellants had received services from a foreign supplier and made payments in foreign currency between 2003 to 2005, they were not liable to pay service tax as per the legal precedent set by the aforementioned judgments. Therefore, the Tribunal set aside the service tax demand against the appellants and allowed the appeal with consequential relief.

Conclusion: The Tribunal ruled in favor of the appellants, stating that they were not liable to pay service tax on the payments made to foreign consultants for the services received during the period in question, based on the legal interpretation derived from the judgments of the Hon'ble Bombay High Court and the Hon'ble Apex Court.

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