NAHAR SPINNING MILLS Vs. CCE

JUDGEMENT

(1.) THE Appellants, a Public Limited Company, are a 100% E.O.U. having their factory at village Simrai Industrial Area, Mandideep, Distt. Raisen, Madhya Pradesh where they manufactured cotton yarn and blended yarn for export. For export of their finished product, they availed the services of middlemen abroad who help them in procuring the export orders and for which they received commission from the Appellants. The service received by the Appellants from the middlemen abroad is "Business Auxiliary Service" covered by Section 65(19) of the Finance Act, 1994. Since the foreign middlemen from whom the service of help in procuring export orders is being received by the Appellants do not have any office or business establishment in India, the Revenue was of the view that during the period from July, 04 to Nov' 05, during which this service was received, the Appellant, being recipient of the service from service providers not having any office or business establishment in India, would be liable to pay the service tax in terms of the provisions of Rule 2(1)(d)(iv) of Service Tax Rules, 1994. It is on this basis that three show cause notices dt. 5.8.05, 13.3.06 and 31.3.06 for demand of non -paid service tax amounting to Rs. 9,35,450/ - (Rs. 3,08,769+3,44,048+2,82,633) during the period from July' 04 to Nov' 05 were issued to the Appellants alongwith interest on this tax and imposition of penalty on the Appellants under Section 76, 77 and 78 of the Finance Act, 1994. The Dy. Commissioner vide order -in -original dt. 31.8.06, 31.8.06 and 1.8.06 respectively confirmed the service tax demands as raised in the show cause notices alongwith interest at the applicable rate under Section 75 of the Finance Act, 1994 and besides this also, imposed penalties on the Appellants under Section 76, 77 and 78 of the Finance Act. On appeal, the Commissioner (Appeals) vide orders -in -appeal dt. 19.12.06 & 20.12.06 while upholding the service tax demand and penalty under Section 78, reduced the penalty under Section 76 to Rs. 100/ - per day and penalty under Section 77 to Rs. 500/ -. It is against these orders of the Commissioner (Appeals) that these appeals has been filed before the Tribunal.

(2.) HEARD both the sides.

(3.) ANOTHER point raised by the appellant is that the service is being provided by persons who are from outside India, not having any office or business establishment in India and the same is being provided from off shore location and that the specific provision for making the service recipient in India as the "person liable to pay the service tax" in such a situation were made by introducing Section 66A of the Finance Act, 1994 w.e.f. 18.4.06 and therefore, prior to 18.4.06, in such a situation, the service tax liability could not be fastened on the recipient of service in India. In this regard, the judgments of this Tribunal in the cases of Foster Wheeler Energy Ltd. v. CCE (supra) and CCE, Raipur v. Zindal Steel & Power Ltd. (supra) have been cited. However, we find that this very issue has been considered by the Larger Bench of the Tribunal in the case of Hindustan Zinc Ltd. v. CCE, Jaipur (supra) wherein the Tribunal held that in cases where taxable service is provided by a non -resident or a person from outside India who does not have any office in India and is received by a person in India, the service tax liability can be fastened on the service recipient in India only w.e.f. 1.1.05 and in arriving at this conclusion, the Tribunal had noted the fact that w.e.f. 18.4.06, Section 66A has been inserted in Finance Act, 1994 by the Finance Act, 2006 incorporating provisions regarding charge of service tax on the services received from outside India and that a number of taxable services can be provided inside India as well as from abroad.