STERLITE INDUSTRIES (INDIA) LTD. Vs. CCE

JUDGEMENT

(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 This Section 68 as originally enacted provided for payment of service tax by every person providing taxable service.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:

(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.