Foreign Companies Not Liable for Service Tax in India Pre-2005

The Tribunal held that services provided by foreign companies without an office in India, such as M/s. Siemens AG of Germany and M/s. OTO Melara of Italy, did not attract Service Tax liability before 1.1.2005 under the category of "Consulting Engineer." Relying on the precedent set by a Larger Bench in a similar case, the Tribunal deemed the tax demand on the services unsustainable and allowed the appeal with consequential relief, setting aside the impugned order.

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Issues:
Whether activities undertaken by foreign companies without an office in India would be subject to Service Tax as "Consulting Engineer" prior to 1.1.2005.

Analysis:
The Appellate Tribunal, CESTAT, New Delhi, considered the issue of whether services provided by foreign companies, M/s. Siemens AG of Germany and M/s. OTO Melara of Italy, to the appellant company would fall under the purview of Service Tax as "Consulting Engineer" before 1.1.2005. The Advocate for the Appellant referred to the case of M/s. Hindustan Zinc Ltd. vs. CCE, Jaipur, where the Larger Bench of the Tribunal had ruled that a recipient of service from a non-resident entity without an office in India was not liable to pay service tax before 1.1.2005, even with the amendment in Rule 2(1)(d) of the Service Tax Rules under Notification No. 12/2004.

The Tribunal concurred with the decision of the Larger Bench in the case of Hindustan Zinc Ltd. and held that the service provided by foreign companies without an office in India did not attract tax liability prior to 1.1.2005. Therefore, the demand for tax on the services provided by the foreign companies was deemed unsustainable before the specified date. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal's ruling clarified that services provided by non-resident foreign companies without an office in India, such as M/s. Siemens AG of Germany and M/s. OTO Melara of Italy, as "Consulting Engineer" were not subject to Service Tax liability before 1.1.2005, based on the interpretation of relevant legal provisions and precedents set by the Larger Bench of the Tribunal in similar cases.

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