2007 (8) TMI 296 - AT - Service Tax

Tribunal remands service tax dispute, citing territorial waters exemption. Fresh assessment ordered for offshore services appeal.

HINDALCO INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., VADODARA

The Tribunal set aside the Commissioner (Appeals) order and remanded the case to the Original Authority for reconsideration. The appellant's liability for ... Service Tax circular No.36/4/01 dt. 8/10/2001 holds that service provided beyond the territorial waters will not attract service tax. This circular will be relevant till the amendment brought out in service tax laws by insertion of Section 66A w.e.f. 18/4/2006. Therefore, the appellant’s contention that the demand on services relating to identified offshore services cannot be subjected to service tax during the relevant period is acceptable - matter remanded to the Original Authority Issues:1. Liability for service tax on services received from a non-resident.2. Interpretation of the Finance Act, 1994 regarding service tax on offshore services.3. Applicability of circular No.36/4/2001 on services provided beyond territorial waters.Analysis:1. The case involved a dispute regarding the liability of the appellant for service tax on detailed design services received from a non-resident entity. The Original Authority and the Commissioner (Appeals) held the appellant liable for service tax under Section 73 read with Section 68 of the Finance Act, 1994. The appellant contended that the services were rendered outside India and thus not liable for service tax.2. The Tribunal considered the submissions and referred to the case of M/s. Foster Wheeler Energy Ltd. where it was established that certain services were rendered outside India, and the agreement clearly distinguished between onshore and offshore services. The Tribunal noted that the amendment inserting Section 66A in the Service Tax Provisions by the Finance Act, 2006, made offshore services liable for tax from 18/4/2006. However, for the period before the amendment, services provided beyond territorial waters were not subject to service tax as per circular No.36/4/2001.3. Based on the above analysis, the Tribunal set aside the order of the Commissioner (Appeals) and remanded the case to the Original Authority for reconsideration in light of the appellant's submissions and relevant legal provisions. The Tribunal allowed the appeal by way of remand, emphasizing the need for a fresh consideration of the matter and providing a reasonable opportunity for the appellant to present their case.