Reverse charge service tax fails where no proof shows receipt and payment for alleged foreign consultancy service.

Reverse charge service tax liability for alleged import of design and engineering consultancy from China required proof that a taxable service was actually received from abroad and that payment was made for that service. The record indicated that the recipient's case was that only equipment had been imported, with no payment shown for design or engineering consultancy, while the Revenue relied mainly on the agreement and a proforma invoice. In the absence of verification of foreign remittance or other supporting evidence, mere reliance on those documents was insufficient to establish tax liability, and the demand was held unsustainable.

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Issues: Whether service tax was payable on reverse charge basis on the alleged import of design and engineering consultancy service from China.

Analysis: The liability to pay service tax on reverse charge basis had to be linked to proof of receipt of a taxable service from abroad and to actual payment for such service. The record showed that the respondent's case was that only equipment had been imported and that no payment was made for design or engineering service, while the Revenue relied mainly on the agreement and a proforma invoice. The impugned order had also noted the absence of verification of foreign remittance or other supporting evidence from the Revenue. Mere reliance on the agreement and proforma invoice, without evidence of actual payment towards the alleged taxable service, was insufficient to fasten liability.

Conclusion: The demand of service tax on reverse charge basis was not sustainable and the appeal filed by the Revenue was rejected.

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