COMMISSIONER OF CENTRAL EXCISE. AND S.T., BANGALORE Vs. MICRO LABS LTD.

JUDGEMENT

(1.) This appeal is by the revenue challenging the order passed by the Tribunal holding that the service tax liability on the recipient of the services arises only from 18-4-2006 and therefore service tax liability imposed on the Assessee from 9-7-2004 to 31-3-2006 was set aside.

(2.) The Assessee is engaged in the activity of receiving taxable services under the category of Business Auxiliary Service as defined under Section 65 (19) of Finance Act 1994 (hereinafter referred to as 'the Act'). In the course of business the Assessee had entered into an agreement with commission agents outside India who marketed/distributed the pharmaceutical products belonging to the Assessee during the period from 9-7-2004 to 31-3-2006. For receiving such services the Assessee was paying remuneration in the form of commission to the agents outside India. The commission agents/service providers were non-residents or outside India or did not have offices in India. Therefore a show cause notice was issued calling upon the Assessee to discharge the service tax liability. An amount of Rs. 1,19,71,705/- was claimed as total value of the taxable service. In addition education cess and interest was also claimed and they were also called upon to show cause as to why penalty should not be imposed. The Assessee contended that the service providers are providing service abroad. Hence the service providers did not attract levy of service tax and they have no intention to evade service tax in as much as they were under the bona fide belief that they were not liable to pay service tax for the aforesaid reasons. They denied the liability to pay tax, interest and penalty.

(3.) The assessing authority on a consideration of the aforesaid representation held that it is not in dispute that the Assessee is a receiver of taxable service from abroad. The Assessee had agreements with overseas commission agents who provided the service of distribution of pharmaceuticals belonging to the Assessee. For the aforesaid service provided by the overseas agent, commission was paid by the Assessee. The Assessee was a recipient of service provided from abroad. That the service providers had provided the service abroad is not legally tenable. The service was received by the Assessee in India and consumed in India. The service providers in the present case are admittedly non-resident/ from outside India and do not have any office in India. In such a case service tax liability is fastened on the recipient of service as prescribed under Rule 2(1)(d)(iv) of Service Tax Rules, 1994. Therefore, they fastened the liability to pay the service tax on the Assessee for the period earlier to 31-3-2006. They also imposed interest and penalty. Aggrieved by the said order the Assessee preferred an appeal to the Tribunal. The Tribunal relying on the judgment of the High Court of Bombay in the case of Indian National Ship Owners Association v. Union of India, 2009 13 STR 235 and Unitech Ltd. v. CST, Delhi,2008 12 STR 752, held that the service tax liability on the recipient of the service would arise only from 18-4-2006 and therefore he set aside the order passed by the assessing authority. Aggrieved by the same, revenue is in appeal.