2009 (3) TMI 24 - AT - Service Tax

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, ... Consulting engineer service - taxability of services provided from outside India by non-resident without office in India - recipient liability for service tax - prospective applicability of taxation specified from 1-1-2005Consulting engineer service - taxability of services provided from outside India by non-resident without office in India - recipient liability for service tax - Whether services rendered to the appellant by foreign companies having no office in India were exigible to service tax as 'consulting engineer' and whether the appellant was liable to pay service tax for the period January, 2003 to March, 2004. - HELD THAT: - The Tribunal, following the decision of the Larger Bench in Hindustan Zinc Ltd. (Tri-LB), held that where taxable service is provided by a non-resident from outside India and the provider has no office in India, such service was specified as taxable only with effect from 1-1-2005. Consequently, the recipient could not be held liable to pay service tax for periods prior to 1-1-2005. Applying that principle to the facts before it - services supplied by M/s. Siemens AG and M/s. OTO Melara, both non-resident entities with no office in India - the demand of service tax for the period January, 2003 to March, 2004 was not sustainable. The Tribunal therefore set aside the impugned order and allowed the appeal. [Paras 3, 4]The demand of service tax on the appellant as recipient of consulting engineer services from the foreign companies for January, 2003 to March, 2004 is unsustainable; the impugned order is set aside and the appeal is allowed with consequential relief.Final Conclusion: Appeal allowed; service tax demand on the appellant in respect of consulting engineer services received from the foreign companies for January, 2003 to March, 2004 quashed, with consequential relief. 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.