2016 (3) TMI 528 - AT - Service Tax

Appellant prevails in service tax case on foreign payments & marketing services for parent

The Tribunal ruled in favor of the appellant in a case concerning service tax liability on amounts paid to foreign entities and marketing services for ... Liability of Service tax - Amount paid to foreign entities for the services rendered by them prior to 18.04.2006 - Held that:- the provisions of Section 66A of the Finance Act 1994 came into Statute with effect from 18.04.2006 and for the period prior to 18.04.2006, the service tax liability does not arise on the appellant under reverse charge mechanism. This law is now settled by the Hon'ble High Court of Bombay in the case of Indian National Ship Owners Association. The judgement of the Hon'ble Bombay High Court was carried in SLP by the Revenue in Apex Court and the Apex Court has dismissed the SLP in view of the fact that the amount of service tax liability confirmed under this Head are prior to 18.04.2006. therefore, by following the same, appellant is not liable to pay Service tax. Liability of Service tax - Various amounts received for marketing of the services of the parent concern - Held that:- the issue is settled by a majority order of the Tribunal in the case of Microsoft Corporation (I) (Pvt) Ltd Vs CST Delhi [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)] and many more in the favour of appellant. Therefore, the Service tax liability is not sustained. Demand of Service tax for the period July 2003 to 19.11.2003 - Denial of benefit of Notification No. 6/1999 granting exemption from payment of duty if the service which are provided are paid in convertible foreign exchange due to withdrawal - Held that:- the issue is no more res integra. It is the avowed principle of Govt of India that only services have to be exported and not the tax. If that be so, in this case, when there is no dispute as to the services being exported and the amount received in foreign exchange tax, liability arises on the appellant which is for the reason that Notification No. 6/1999 was withdrawn. By following the decision of Tribunal in the case of SGS (I) Pvt Ltd Vs CESTAT Mumbai [2011 (2) TMI 54 - CESTAT MUMBAI], the benefit of Notification is not denied and the demand of service tax not raised. - Decided in favour of appellant with consequential relief Issues:1. Whether the appellant is required to discharge service tax liability on amounts paid to entities abroad and on marketing services for their parent concern.2. Applicability of service tax liability on services received from non-recipient service providers.3. Service tax liability on amounts received for marketing the services of the parent concern.4. Demand of service tax liability for a specific period due to the withdrawal of exemption Notification No. 6/1999.Issue 1 - Service Tax Liability on Amounts Paid to Foreign Entities:The appeal questioned if the appellant must pay service tax on amounts paid to foreign entities and for marketing services for their parent concern. The Revenue authorities argued that the repatriated amounts were liable for service tax under Rule 2(d)(iv) of the Service Tax Rules. The Tribunal found that service tax liability did not arise before 18.04.2006, as per Section 66A of the Finance Act 1994. Citing the judgment of the Bombay High Court and the Apex Court's dismissal of the Revenue's appeal, the Tribunal ruled in favor of the appellant, setting aside the tax demand.Issue 2 - Service Tax Liability on Marketing Services for Parent Concern:The dispute centered on whether the appellant's marketing services for their parent concern in India attracted service tax liability. The Tribunal referenced a majority order in a similar case and various Tribunal decisions supporting the appellant's position. Considering the settled view in favor of the appellant, the Tribunal held that the demand for service tax liability could not be sustained, leading to the appeal being allowed.Issue 3 - Demand of Service Tax Liability Due to Withdrawal of Notification No. 6/1999:The issue involved a demand for service tax liability for a specific period due to the withdrawal of Notification No. 6/1999, which granted exemption from duty if services were paid in convertible foreign exchange. The Tribunal referred to a case involving the withdrawal of the notification and the subsequent reinstatement of a similar exemption. By analyzing the legal position and clarifications by the Central Board of Excise & Customs, the Tribunal concluded that there could be no demand for service tax, as the issue was covered by the judgment of the Bombay High Court, leading to the impugned order being set aside.This comprehensive analysis of the legal judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's detailed reasoning and conclusions for each issue, ensuring a thorough understanding of the case and its implications.