2015 (10) TMI 2154 - AT - Service Tax

Tribunal upholds assessee's appeal, rejects Revenue's claim on service tax. High Court's interpretation key.

Commissioner of Central Excise, Customs Versus M/s Mafatlal Burlington Ltd. And vice-versa

The Tribunal allowed the appeal filed by the assessee, rejecting the Revenue's appeal. The demand for service tax, interest, and penalty was deemed ... Import of services - reverse charge - assessee paid the amount to foreign companies for providing service under the category of Intellectual Property Right - Held That:- Amount paid by assessee was as fees for services rendered by non-resident service provider - Services provided to assessee outside India become taxable service as per Section 66 A of the Finance Act, 1994 - Respondents are restrained from levying service tax for the period from 1-3-2002 till 17-4-2006 - Demand of tax and penalties not sustained - Appeal of revenue rejected - Decision made in the case of Indian National Ship-owners Association Vs Union of India [2008 (12) TMI 41 - BOMBAY HIGH COURT] followed - Decided in favour of assessee. Issues: Appeal against demand of service tax, imposition of penalty, interpretation of Section 66A of the Finance Act, 1994.Analysis:1. Demand of Service Tax and Penalty: The case involved a dispute regarding the demand of service tax amounting to a specific sum along with interest and penalty imposed on the assessee for a particular period. The assessee was engaged in the manufacture of Cotton Yarn, Cotton Denim Fabrics, and Readymade Garments. The issue arose from the payment made by the assessee to foreign companies for services categorized under 'Intellectual Property Right/Service.' The Adjudicating authority confirmed the tax demand, interest, and penalty. However, the Commissioner (Appeals) set aside the penalty under Section 78 but upheld the Adjudication order. Both the assessee and the Revenue appealed before the Tribunal, leading to a common order for disposal.2. Interpretation of Section 66A of the Finance Act, 1994: The Tribunal referred to a significant decision of the Hon'ble Bombay High Court in the case of Indian National Ship-owners Association Vs Union of India. The High Court's ruling highlighted the applicability of Section 66A of the Finance Act, 1994, which became effective from a specific date. The judgment emphasized that prior to the enactment of Section 66A, the authorities lacked the legal authority to levy service tax on Indian residents for services received from non-residents outside India. The enactment of Section 66A altered this scenario, making Indian recipients of taxable services liable to be treated as service providers. The High Court's decision established the legal framework for the taxation of services rendered outside India to Indian residents under Section 66A.3. Decision and Outcome: Considering the interpretation provided by the Hon'ble Bombay High Court regarding the applicability of Section 66A, the Tribunal concluded that the demand for service tax, interest, and penalty could not be sustained. Consequently, the appeal filed by the assessee was allowed, while the Revenue's appeal was rejected based on the legal principles outlined in the judgment. The Tribunal's decision was guided by the legal interpretation provided by the High Court, leading to the dismissal of the Revenue's appeal and the acceptance of the assessee's appeal against the demand and penalty.In summary, the judgment addressed the issues related to the demand of service tax, imposition of penalty, and the interpretation of Section 66A of the Finance Act, 1994. The decision was based on the legal principles established by the Hon'ble Bombay High Court, which clarified the taxation framework for services provided outside India to Indian residents under Section 66A.