2015 (1) TMI 344 - AT - Service Tax

Tribunal dismisses Revenue's appeal, rules in favor of Gabriel India Ltd. on Service Tax classification

COMMISSIONER OF C. EX. & CUS., NASHIK Versus GABRIEL INDIA LTD.

The Tribunal ruled in favor of the respondent, M/s. Gabriel India Ltd., dismissing the appeal filed by the Revenue. The decision was based on the ... Consulting Engineer’s Service - Supply of technical know-how - import of services - Held that:- Transaction is one of supply of technical know-how and payment of royalty thereon. Supply of technical know-how does not fall under the category of ‘Consulting Engineer’s Service’ and, therefore, the classifications for levy of Service Tax adopted is incorrect. Secondly, the service provider is a foreign company and he has 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 [2004 (8) TMI 2 - CESTAT, MUMBAI]. 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 does not have any office in India. Rendering of service in India is distinct and different from receipt of service in India. In the present case, technical know-how has been provided by the foreign service provider. Therefore, the transaction is one of providing of service from abroad and receiving it in India, that is, import of service and, therefore, the provisions of Section 68 read with Rule 6 of Service Tax Rules, 1994 do not apply. In the case of service received from abroad, the said activity become 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 - [2008 (12) TMI 41 - BOMBAY HIGH COURT], which was affirmed by the Hon’ble Apex Court [2009 (12) TMI 850 - SUPREME COURT OF INDIA]. - Decided against Revenue. Issues:1. Classification of services for Service Tax liability.2. Application of Section 68 and Rule 6 of the Service Tax Rules, 1994.3. Taxability of services provided from abroad.Classification of services for Service Tax liability:The case involved M/s. Gabriel India Ltd. receiving technical know-how and consultancy services from SQQI Inc., Japan, for which they paid royalty. The Revenue contended that these services fell under 'Consulting Engineer's Service,' making the respondent liable for Service Tax under Section 68 of the Finance Act, 1994. However, the Tribunal disagreed, stating that technical know-how supply does not fall under this category, leading to an incorrect levy of Service Tax.Application of Section 68 and Rule 6 of the Service Tax Rules, 1994:The Revenue argued that as per Rule 6 of the Service Tax Rules, 1994, if services are provided by a non-resident without an office in India, the Service Tax should be paid by the recipient or an authorized person. The Revenue contended that since the respondent received the service, they were liable for the Service Tax. However, the Tribunal noted that the service provider was a foreign company who had not authorized the respondent to pay the tax on their behalf. Citing precedent cases, the Tribunal ruled that the Service Tax liability could not be imposed on the appellant in this scenario.Taxability of services provided from abroad:The Tribunal highlighted the distinction between services rendered in India and services received in India. In this case, the technical know-how was provided by a foreign company and received in India, constituting an import of service. The Tribunal clarified that the provisions of Section 68 and Rule 6 of the Service Tax Rules, 1994 did not apply to services provided from abroad. They referenced a case where the Government was empowered to levy Service Tax on a reverse charge basis for services provided from abroad. Consequently, the Tribunal dismissed the appeal, emphasizing that the transaction in question did not merit any Service Tax liability.In conclusion, the Tribunal ruled in favor of the respondent, M/s. Gabriel India Ltd., dismissing the appeal filed by the Revenue based on the incorrect classification of services for Service Tax liability, the inapplicability of Section 68 and Rule 6 in this context, and the taxability considerations for services provided from abroad.