By TIOL News Service

NEW DELHI, AUG 01, 2017: THE appellant is a service provider and registered with the Service Tax Department.

During the course of audit of books of accounts maintained by the appellant, the Department observed that during the financial years 2006-07 to 2007- August 2008, the appellant did not pay the service tax on 'commission' amount paid to the foreign travel agent under reverse charge mechanism.

The SCN was adjudicated, the demand was confirmed along with penalties and which order was upheld by the Commissioner (Appeals).

Before the CESTAT, the appellant submitted that they never advised their foreign clients to approach persons appointed in foreign countries for booking accommodation in appellant's hotel; that such services provided by overseas agents to the foreign tourists in relation to booking of accommodation in appellant's hotel is provided outside India and also consumed outside India. Inasmuch as such services cannot be held liable to Service Tax in India under reverse charge mechanism.

It is also submitted that import of service was not liable to Service Tax under reverse charge mechanism prior to 18.04.2006. Also, the Service Tax demand for the period 01.03.2008 to 31.08.2008 is not sustainable in view of the Notification No. 14/2008 - ST dated 01.03.2008. And that the demand is time barred.

The AR supported the stand taken by the lower authorities.

The Bench observed -

"6. The fact is not under dispute that whenever the foreign tourists planned to visit India, they approached the overseas agents for necessary guidance for booking of accommodation in India. It has also not been disputed by the Department that the appellant had never advised to the foreign clients to approach the persons appointed in the foreign countries for booking accommodation in the hotel owned by the appellant. Thus, the appellant is not in the picture as far as receipt of any taxable service from the overseas clients is concerned. Since the services were provided and consumed outside India, we are of the view that the appellant will not be liable to Service Tax under reverse charge mechanism in terms of Section 66A of the Finance Act, 1994."

The impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-2710-CESTAT-DEL)