Foreign service provider not liable for service tax under Finance Act, 1994. Court references Karnataka High Court judgment.

The appeal was allowed as the court held that a foreign service provider was not liable to pay service tax under the Finance Act, 1994 for the specified period. The court referenced a judgment by the Hon'ble Karnataka High Court, stating that the Act did not apply to foreign companies providing services, and liability rested with the service recipient under Section 66A from 18.4.2006. As Section 66A was not in effect during the period in question, the demand for service tax from the overseas service provider was dismissed, and the impugned order was set aside.

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Issues:
Demand of service tax on overseas service provider for the period 19.5.1998 to 15.8.2002 under Consulting Engineering Service.

Analysis:
The appeal was filed against the order passed by the Commissioner of Central Excise (Appeals), Coimbatore, confirming the demand of service tax provided by the overseas service provider. The appellant, a foreign service provider, was involved in supplying technical information, granting rights, and testing and valuation in Japan. The Commissioner (Appeals) reduced the demand and penalty in the impugned order.

Upon reviewing the impugned order and hearing both parties, it was noted that the case pertained to the demand of service tax on the overseas service provider for the specified period under Consulting Engineering Service. Reference was made to a judgment by the Hon'ble Karnataka High Court in a similar case involving the appellant, where it was held that a foreign service provider is not liable to pay service tax under the Finance Act, 1994. The court's decision was based on the fact that the Finance Act, 1994 was not applicable to a foreign company providing services, and the liability was imposed on the recipient of the service through Section 66A, effective from 18.4.2006.

In line with the judgment of the Hon'ble High Court of Karnataka, it was concluded that there was no provision to demand service tax from a foreign service provider for the specified period as Section 66A of the Finance Act, 1994, which imposed such liability on the recipient of the service, was inserted only with effect from 18.4.2006. Consequently, the impugned order was set aside, and the appeal was allowed.

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