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2023 (6) TMI 1245 - AT - Service TaxLevy of service tax - alleged consulting engineers services on the Royalty payments made to the foreign company by the appellant - reverse charge mechanism - HELD THAT:- The demand of Service Tax prior to 18.04.2006 is not sustainable as the charging Section 66A of the Finance Act, 1994 for levy of Service Tax on the services provided to the foreign service provider on reverse charge basis was enacted only with effect from 18.04.2006. In view of the ratio laid down in the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [2008 (12) TMI 41 - BOMBAY HIGH COURT], which has been upheld by the Hon’ble Supreme Court in UNION OF INDIA VERSUS INDIAN NATIONAL SHIPOWNERS ASSOCIATION [2009 (12) TMI 850 - SC ORDER], the appellant cannot be fastened with Service Tax liability for the Royalty payments made under consulting engineer service prior to 18.04.2006. The second proviso to sub-rule (1) to the Rule 6 clearly provides that notwithstanding the time of receipt of payment towards value of service, no Service Tax shall be payable for the part or whole of the value of services which is attributable to services provided during the period when such services were not taxable. As such, the impugned order holding that the taxable event is not the provision of the service but the date on which the value of taxable service is paid, is not legally maintainable. Hence, the demand of tax confirmed in this regard is not sustainable. The appellant was issued with a Show Cause Notice C.No.IV/16/172/2003-STC dated 14.10.2003 for the period from 1997 to 2001 demanding appropriate Service Tax on Royalty paid which was dropped vide Order-in-Appeal No. 109/2004 dated 08.09.2004, indicating that the Department was well aware of the activities of the appellant such as payment of Royalties to foreign collaborators under consulting engineer service. The demand of Service Tax on the appellant for the normal period is confirmed - penalties imposed are also set aside - appeal allowed in part.
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