Service performed by Foreign Service Provider Outside India Not Liable to Pay Service Tax on Reverse Charge Basis: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service performed by the foreign service provider outside India was not liable to pay service tax on a reverse charge basis. 

Pakona Engineers India Pvt. Limited, the appellant assessee appealed against the order passed by the Commissioner for confirming the demand of service tax to the assessee. 

Dhaval Shah, the counsel for the assessee contended that Rule 3(2) of Service Tax Rules, 2006 reveals that if services had been performed by a foreign service provider outside India and if the same is not provided even partly in India, it does not qualify import service under Rule 3(ii) of Taxation of Service Rules, 2006. 

Further submitted that the assessee is not liable to pay service tax on reverse charge basis and the decision made by the Commissioner was not as per the law and liable to be deleted. 

Rajesh K Agarwal, the counsel for the department relied on the decisions made by the lower authorities and contended that since the service has been availed by the appellant from abroad, they should have paid service tax on a reverse charge basis as per the provisions of Section 66A of the Finance Act, 1994 read with Rule 2(1) (d) (4) of the Service Tax Rules. 

The Bench observed that the services had been performed by a foreign service provider outside India and if the same was not provided even partly in India was not liable to pay service tax on a reverse charge basis. 

The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Technical) quashed the order passed by the Commissioner while allowing the appeal filed by the assessee. 

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