COMMISSIONER OF CENTRAL EXCISE Vs. PRINTOTECH GLOBAL LTD.

JUDGEMENT

(1.) M /s. Printotech Global Ltd. entered into a contract with M/s. Yuan Harng Co. Ltd. (hereinafter referred to as 'YHCL') for technical collaboration on 15 -9 -97. M/s. YHCL was to provide to the respondents technical know how for the manufacturing Mono layer seamless tube. The services provided by M/s. YHCL to the respondents were categorised under the services of consulting engineers and the respondents were asked to pay the service tax on the gross amount paid by them as technical assistance fee to M/s. YHCL, Taiwan. Show cause notice was issued to the respondents demanding service tax and also imposing penalty on them for not filing the returns. The original authority demanded service tax and imposed penalty on M/s. YHCL and M/s. PGL jointly and severally. However, the Commissioner (Appeals) under the impugned order observed that the present respondents were the service receiver and the service was provided by M/s. YHCL, Taiwan prior to 1 -3 -99. During that period, M/s. YHCL, Taiwan, were legally required to pay the service tax on the taxable value of services rendered by them. The Commissioner (Appeals) observed that the demand of service tax relates to the period prior to the introduction of provisions under Rule 6 of Service Tax Rules holding the service receiver to bear the liability of tax. This provision was introduced w.e.f 28 -2 -99 where it was provided that in case of a person who was a non -resident or was from outside India and did not have any office in India, the Service Tax thereon could be paid by any other person authorised by such service provider in this regard. Accordingly, he held that at the material time the present respondents, being service receiver, were not liable for payment of any service tax.

(2.) IT was argued for the Revenue that as per Article 5(11) of MOU dated 15 -9 -97, "all the above fees are net of taxes as per Indian Laws". It was therefore, argued that the respondents were liable to deduct the service tax and pay to the Government. Accordingly, the order of the Commissioner (Appeals) is not correct in law and the same may be set aside.

(3.) I have considered the submissions made by both the sides. I find that the reliance placed by the Commissioner in their appeal petition on the agreement between the respondents and M/s. YHCL to the effect that the payments will be made by M/s. PGL to M/s. Y.H.C.L. net of taxes treating the service tax payable by the respondents is not correct. The respondents could have deducted only that tax which is deductible at the source according to Indian Laws i.e. the income tax and no other tax unless they are authorised by the provider of the services to pay the tax on their behalf to the Government. In the present case, since the services were provided prior to 28 -2 -99, therefore, receiver of the services was not liable to pay the service tax. There was no authorisation by the provider of service to appellant to pay service tax on their behalf. Therefore, demand of service tax on the respondent and imposition of penalty on them at relevant time is not according to the provisions of law. The Commissioner (Appeals) has correctly decided the issue and his order need not to be interfered with.