2015 (9) TMI 50 - AT - Service Tax

Tribunal rules in favor of appellant exempting overseas services. No tax liability pre-18.04.2006. Retrospective amendments don't create tax.

The Tribunal ruled in favor of the appellant on all issues. The demand for services provided to overseas entities was held to be exempt under the Export ... Deputation of employees by the overseas associates - Manpower Supply and Recruitment Services - Service provider not situated in India - remittances were prior to 18.04.2006 - Held that:- The reversal of the normal inherence of tax mandated by the provisions of the Act was introduced by the legislative dynamics of Section 66A introduced by the Finance Act, 2006 w.e.f. 18.04.2006. Prior to 18.04.2006, a recipient of Manpower Supply and Recruitment service was not liable to remit tax in the absence of any legislative authorisation for levy and collection of service tax on a recipient of the service. Export of services - liability for remittance of tax on the basis of book entries made even though no consideration is actually received prior to 10.05.2008 - Held that:- For entries made prior to 10.05.2008 there is no liability to remittance of tax merely on account of amendment to the provisions of Section 67 of the Act is a principle concluded by decisions of this Tribunal in Sify Technologies vs. CCE [2010 (11) TMI 232 - CESTAT, CHENNAI] and Gecas Services India Pvt. Ltd. vs. CST, New Delhi [2014 (7) TMI 410 - CESTAT NEW DELHI]. Demand alongwith interest and penalties as specified in the impugned order, cannot be sustained. The impugned order is accordingly quashed - Decided in favour of assessee. Issues:1. Taxability of services provided to overseas associated entities under Export of Service Rules, 2005.2. Liability for service tax on Manpower Supply and Recruitment Services prior to 18.04.2006.3. Retrospective effect of amendments to Section 67 of the Finance Act, 1994 on tax liability based on book entries.Analysis:Issue 1: Taxability of services to overseas entitiesThe impugned order confirmed a demand for services provided to overseas entities, rejecting the appellant's claim for immunity under the Export of Service Rules, 2005. However, the Tribunal held in favor of the appellant citing precedents like Microsoft Corporation India Pvt. Ltd. vs. CST and Vodafone Cellular Ltd. vs. CCE, stating that such services fall within the ambit of the Export of Service Rules, 2005.Issue 2: Liability for service tax on Manpower Supply and Recruitment ServicesA demand for service tax on Manpower Supply and Recruitment Services provided by overseas entities to the appellant was confirmed in the impugned order. The Tribunal ruled that prior to 18.04.2006, the recipient of such services was not liable for tax, as established in precedents like Indian National Shipowners Association vs. UOI. The decision emphasized that secondment of employees from abroad for service in India does not constitute Manpower Supply or Recruitment service, as seen in cases like Computer Science India Pvt. Ltd. vs. CST.Issue 3: Retrospective effect of amendments to Section 67Regarding the liability based on book entries made prior to 10.05.2008, the Tribunal held that there is no liability for tax remittance solely due to amendments in Section 67 of the Act. Precedents like Sify Technologies vs. CCE were cited to support this conclusion.In conclusion, the impugned order confirming the demand, interest, and penalties was quashed, and the appeal was allowed. The Tribunal dismissed the Miscellaneous Application as infructuous since the appeal was disposed of, with no order as to costs.