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of <h1>Dispute over foreign service tax liability resolved with waiver of penalties, stay on recovery.</h1> <h3>AUSMELT LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II</h3> The case involved a dispute regarding the liability to pay service tax for services received from foreign firms by Hindustan Zinc Ltd. The appellants had ... Consulting engineering service received from abroad – service tax paid on receipt of service claimed as refund - who shall pay the service tax in respect of services received from foreign firms - held that only from 1-1-2005 after issue of notification under section 66A specifying the services for which the recipients are required to pay the service tax, the liability to pay service tax shall rest on the recipient - prima facie, on merits as well as on time bar aspect, the appellants have made out a case – stay granted Issues Involved:1. Liability to pay service tax for services received from foreign firms.2. Rejection of refund claim and imposition of penalties on the appellants.3. Waiver of pre-deposit of dues and stay of recovery till disposal of appeals.Issue 1: Liability to pay service tax for services received from foreign firmsThe case involved Hindustan Zinc Ltd. receiving consulting engineering services from foreign-based appellants between April 2003 and December 2004. Initially, Hindustan Zinc paid service tax for these services but later claimed a refund, leading to a rejection of the refund claim. Subsequently, show cause notices were issued to the appellants by officers based on further investigation, demanding duty payment and imposing penalties. The Larger Bench had previously ruled that the liability to pay service tax for services received from foreign firms rested on the recipient only after the issuance of a notification under section 66A from January 1, 2005.Issue 2: Rejection of refund claim and imposition of penaltiesThe officers visited Hindustan Zinc Ltd. in October 2004 to gather information about the foreign-based firms providing services. This visit led to the issuance of show cause notices, demanding duty payment from the appellants. The subsequent investigation resulted in the confirmation of duty demands, invoking the extended time-limit provisions and imposing penalties on the appellants. However, considering the decision of the Larger Bench and the timing of the liability to pay service tax as per the notification under section 66A, the appellants were able to make a case for the waiver of dues.Issue 3: Waiver of pre-deposit of dues and stay of recovery till disposal of appealsBased on the merits of the case and the time bar aspect, the appellants were successful in making a case for the waiver of pre-deposit of dues. The Tribunal decided to stay the recovery of dues until the appeals were disposed of, acknowledging the prima facie validity of the appellants' arguments. This decision was made to ensure that the appellants were not unduly burdened during the appeal process, providing them with relief from immediate payment obligations.This detailed analysis covers the issues of liability to pay service tax for services received from foreign firms, the rejection of refund claims, imposition of penalties, and the waiver of pre-deposit of dues with a stay on recovery till the disposal of appeals. The judgment reflects a nuanced understanding of the legal principles involved and provides relief to the appellants based on the interpretation of relevant laws and precedents.
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