Appellant exempt from service tax on services from sister company; rule not retroactive. Appeal allowed, impugned order set aside.

The appellant is not required to pay service tax on services received from their sister company in Germany as Rule 2(1)(d)(iv) does not have retrospective application. The services were obtained before the rule's implementation, making the appellant not liable for tax, regardless of the timing of the invoice and payment. The judgment allows the appeal, setting aside the impugned order and providing consequential relief, in line with a previous Tribunal decision. The appellant's argument regarding the service provider's classification was not addressed in the judgment.

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Issues:
Whether the appellant is required to pay service tax on services received from their sister company located in Germany.

Analysis:
The dispute in the present appeal revolves around the liability of the appellant to pay service tax on services received from their sister company in Germany. The services were received between Nov. 2001 to March 2002, with the invoice received in 2003 and payments made thereafter. The crux of the matter lies in the applicability of Rule 2(1)(d)(iv) which mandated the payment of tax by a recipient of taxable services from a foreign entity, effective from 16-8-2002. The appellant argues that since the services were obtained before the introduction of this rule, they should not be taxed, regardless of the timing of the invoice and payment.

The judgment concurs with the appellant's contention, emphasizing that Rule 2(1)(d)(iv) came into effect from 16-8-2002 and does not have retrospective application. As the services in question were availed between Nov. 2001 to March 2002, prior to the implementation of the said rule, the appellant cannot be held liable to pay tax. The timing of the invoice and payment in Sept. 2003 does not alter this legal position. The judgment draws support from a previous decision of the Tribunal in the case of Cadbury India Ltd. v. CCE, Mumbai, highlighting that the appellant's liability cannot be established based on the timing of payment alone. Consequently, the impugned order is set aside, and the appeal is allowed with consequential relief. The judgment refrains from delving into other arguments raised by the appellant regarding the service provider's classification as a consulting engineer.

In conclusion, the judgment clarifies that the appellant is not obligated to pay service tax on the services received from their sister company in Germany due to the non-retrospective application of Rule 2(1)(d)(iv). The timing of the invoice and payment does not alter this outcome, and the appeal is allowed based on this fundamental ground, as per the decision of the Tribunal in a similar case.

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