2009 (7) TMI 84 - AT - Service Tax

CESTAT dismisses Revenue appeals on service tax liability for technical assistance, upholds non-taxable services, statutory provisions

CCE, Indore Versus M/s Hindustan Motors Ltd.

The Appellate Tribunal CESTAT, New Delhi, dismissed all three appeals of the Revenue regarding the liability of service tax on technical information and ... Import of Service – Before 18-4-2006 - Applicability of Service Tax - technical information and assistance - law laid down by Hon’ble High Court of Bombay shall govern the field in stead of Larger Bench decision. Similarly Revenue’s reliance on the decision of Hon’ble High Court of Rajasthan was on the context of Section 66 (2) of the Finance Act 1994. The Appeal of Revenue was dismissed in that case. Even following the ratio laid down by Hon’ble High Court of Rajasthan that when there was no notification for liability, Revenue has no scope to argue further in the present Appeals when there was no enactment to fasten liability in all the three Appeals under Section 66(A) of the Finance Act 1994. Further, decision of Hon’ble High Court of Bombay made on 11.12.08 while the decision in Aditya Cement was made by the Hon’ble High Court of Rajasthan was made on 26.2.08 – service tax was not leviable during the relevant period in view of decision of Bombay high court in the matter of Indian National Shipowners Association Issues:1. Liability of service recipient for service tax on technical information and assistance received.2. Applicability of service tax on service recipient prior to a specific date.3. Interpretation of statutory provisions under Section 66A and Section 68(2) of the Finance Act, 1994.4. Comparison of judgments by different High Courts on the liability of service tax.Analysis:1. The first issue revolves around the liability of the service recipient for service tax on technical information and assistance received. The appellant argued that if the service recipient was not liable to tax for such services, there should be no recovery of service tax from them under the law. This argument was supported by a judgment of the Bombay High Court, which stated that certain categories of services were not taxable before a specific date. The Tribunal considered this argument in light of the relevant provisions and upheld the appellant's contention.2. The second issue concerns the applicability of service tax on the service recipient prior to a particular date. The Department contended that the levy of service tax is on the rendering of taxable service and not on the person receiving the service. They relied on a decision by a Larger Bench and a judgment of the Rajasthan High Court to support their argument. However, the Tribunal disagreed and emphasized that the liability to pay service tax from the recipient arises only when there is a statutory provision to that effect, especially before a specific date.3. The interpretation of statutory provisions under Section 66A and Section 68(2) of the Finance Act, 1994, was crucial in this case. The Tribunal examined these provisions to determine the authority to realize the levy of service tax from a person receiving services from outside India. They highlighted that before the enactment of Section 66A, there was no legal basis to impose such a tax on the recipient. By considering the statutory framework and relevant judgments, the Tribunal concluded that the law laid down by the Bombay High Court would prevail over the decision of the Larger Bench and the Rajasthan High Court.4. Lastly, the Tribunal compared the judgments of the Bombay High Court and the Rajasthan High Court on the liability of service tax. They noted that the decision of the Bombay High Court, rendered after the Rajasthan High Court's judgment, provided more clarity on the issue. The Tribunal found support for their decision in the statutory provision of Section 66A and Section 68(2) of the Finance Act, 1994. Consequently, all three appeals of the Revenue were dismissed based on the legal principles established by the Bombay High Court and the relevant statutory provisions.This detailed analysis of the judgment highlights the key legal issues addressed by the Appellate Tribunal CESTAT, New Delhi, and the rationale behind their decision in dismissing the appeals of the Revenue.