P.G. Chacko, Member (J) - (1.)THE two appeals of M/s. Sterlite Industries (I) Ltd. are against demand of service tax in the category of "Management Consultancy Service" for the period 2002 -03 to 2004 -05. The appeals of M/s. Sharadha Terry Products Ltd. are against demand of service tax in the category of "Business Auxiliary Service" for the period 9.7.2004 to 31.3.2006. In the former case, the services were provided by companies situate abroad. These services were in the nature of "Management Consultancy", for which the appellants paid fee to the foreign companies. In latter case, the services in question were rendered by certain companies situate abroad, who were authorized by the appellants as their agents to market their products in foreign countries. For these services, the appellants paid commission. In either case, the demand is on the gross amount paid by the appellants to the foreign companies. The appellants are also challenging the penalties imposed on them in the respective impugned orders.
(2.)AFTER examining the records and hearing both sides, we note that the controversy in these cases revolves round the scope of applicability of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994. This provision was added to the said Rules on 16.8.2002 by Notification No. l2/2002 -ST dated 1.8.2002. According to the Revenue, this is a provision which can be deemed to have been brought into force for the purpose of carrying into force the provisions of Section 68 of the Finance Act, 1994. This Section 68 as originally enacted provided for payment of service tax by every person providing taxable service. A sub -section was added to this Section under the Finance Act 2003, whereby provision was made under Section 68 for enabling the Central Government to specify that service tax on taxable services shall be paid by such persons and in such manner as may be prescribed at the rate specified under Section 66. The Central Government issued a Notification (36/2004 -ST dt. 31.12.04) specifying various taxable services in respect of which recipients of service could be required to pay service tax. Among these services was there mention of "any taxable service provided by a person who is non -resident or is from outside India and does not have any office in India". To complete this history of legislation, we also mention the enactment of Section 66A w.e.f. 18.4.2006 by the Finance Act, 2006. This new provision reads as under:
66A. (1) Where any service specified in Clause (105) of Section 65 is, - (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be the taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply: Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub -section shall not apply: Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate person fro the rpuspoes of this section. Explanation 1. - A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country. Explanation 2. - Usual place of residence, in relation to a body corporate, means the place where it is incorporated or otherwise legally constituted.

The case of the appellants is that any person in India, who has received any taxable service provided by another person in a country other than India can be required to pay service tax in respect of such service only with effect from the date on which Section 66A came into force. On the other hand, it is the case of the Revenue that such a person could be required to pay service tax under Rule 2(1)(d)(iv) right from 16.8.2002. This claim of the Revenue is contested by counsel by submitting that the various amendments brought to the Service Tax Rules or to the Finance Act 1994 from time to time upto 18.4.2006 were only in relation to taxable service provided in India by a non -resident person. It is submitted that, when such a person leaves the country after rendering the service in India, the difficulty -encountered by the Revenue in the matter of collecting service tax from him is sought to be addressed by such amendments. It is submitted that, in the present cases, the services were provided outside India by persons (corporate entities) stationed outside India, who have no office in India. Such persons could be compelled to pay service tax only w.e.f. 18.4.2006. According to ld.counsel for the appellants, before the enactment of Section 66A ibid, there was no provision in the Finance Act, 1994 authorizing levy of service tax from a person in India who received taxable service provided by a person (with no office in India) resident abroad. In this connection, ld.advocate Shri G. Natarajan has referred to the Board's circular No. 36/4/2001 -ST dated 8.10.2001, wherein it was clarified that the services provided beyond the territorial waters of India were not liable to Service Tax as provisions of Service Tax had not been extended to such areas so far. It is pointed out that this circular was withdrawn only on 10.5.2007 vide circular No. 93/04/07 -ST. It has also been pointed out that, for the period upto 1.1.2005 (when the Central Government notified certain taxable services for purposes of Section 68(2) of the Finance Act 1994), the question whether service tax could be levied from an Indian resident -recipient of taxable service provided by a person resident abroad, under Rule 2(1)(d)(iv) of the Service Tax Rules, is pending before Larger Bench pursuant to referral order in the case of Molex India Ltd. v. Commissioner 2008 (9) STR 369 (Tri. -Bang.). It appears from the said referral order that conflicting views were taken by different Benches on the question of applicability of Rule 2(1)(d)(iv) for the period prior to 1.1.2005, to cases of taxable service received by an Indian resident from abroad. It appears from the arguments put forth before us by both the sides that opinion is divided on this question.

(3.)WE are further of the view that, in the present cases, it has also to be examined as to whether any taxable service provided by a person resident abroad without any office in India can be considered to have been received abroad or in India by a person resident in India. It appears that a distinction is sought to be made between the expressions "providing of service" and "rendering of service". It appears to us that a person resident in India pays for a service provided by a person resident abroad, upon receipt of such service in India. Such transaction involves receipt of service in India unless it is proved that the person resident in India receives such service through his office situate abroad and that the consideration for such service was also paid by such office. Seemingly, these are ancillary questions which require to be considered when the appeals arise for final hearing.
For the present, insofar as the period of dispute upto 1.1.2005 is concerned, the substantial issue in these cases must await the decision of the Larger Bench and, in view of this position, the benefit of waiver of predeposit and stay of recovery can be granted for the demand of service tax and penalties upto 1.1.2005.