2008 (2) TMI 245 - AT - Service Tax

Appellate tribunal rules in favor of appellant, invalidating service tax demand over Rs. 1.7 crores.

ABAN LLOYD OFFSHORE CHILES LTD. Versus COMMR. OF SERVICE TAX, CHENNAI

The appellate tribunal ruled in favor of the appellant, finding the demand for service tax exceeding Rs. 1.7 crores invalid. The tribunal determined that ... Storage and Warehousing Service provided to the appellants by an overseas-resident company – revenue invoked Rule 2(1)(d)(iv) for levy of tax on gross amount paid by appellants to foreign company – Rule 2(1)(d)(iv) is a provision for making the service recipient liable to pay tax whereas he receives a taxable service from the service provider who is resident outside India with no office in India - since section 66A is not applicable to this case, the Rule also cannot be applied – stay granted Issues:Demand of service tax on 'Storage and Warehousing Service' provided by an overseas-resident company, applicability of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, misinterpretation of Section 66A of the Finance Act, 1994.Analysis:The appellate tribunal, after examining the records and hearing both sides, noted a demand of service tax exceeding Rs. 1.7 crores on the appellants for services provided by an overseas-resident company, M/s. Prosafe, involving storage of crude oil on a marine vessel off the Indian shore. The demand was made under Section 73(1) and penalties under the Finance Act, 1994. The impugned order confirmed the service tax demand under Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, as the tax liability of the assessee was deemed not to fall under Section 66A of the Finance Act, 1994.Upon perusing the provisions, the tribunal observed that Rule 2(1)(d)(iv) makes the service recipient liable to pay service tax when receiving a taxable service from a foreign service provider without an office in India, in line with Section 66A. Both provisions came into effect before the dispute period. However, the tribunal found that the learned Commissioner had misunderstood the applicability of Section 66A, leading to an erroneous interpretation. Since Section 66A was not deemed applicable to the case, the Rule 2(1)(d)(iv) could not be applied, rendering the demand for tax invalid.As a result of the above analysis, the tribunal decided in favor of the appellant, granting a waiver of pre-deposit and a stay of recovery regarding the adjudged dues. The decision was dictated and pronounced in the open court, providing relief to the appellants in the matter of the disputed service tax demand.