By TIOL News Service

MUMBAI, OCT 13, 2017: THIS is a Revenue appeal.

The facts are that the respondent had entered into a contract with M/s. Schiffko GMBH, Germany for the activities and scope of work which was to be performed by them during construction of the Seismic Survey Vessel at Amur Shipbuilding Plant at Russia.

Upon realizing that they were not supposed to pay service tax on the above activities, the respondent filed a refund claim of Rs.64,38,636/- on 25/09/2008 on ground of erroneous payment of service tax on 'Technical inspection and certification services'.

SCN dated 17/02/2009 was issued on the ground that services rendered by the contractor under the provisions of contract was within the purview of "Consulting Engineers Service" as defined u/s 65(31) of the FA, 1994 and the service tax having been paid correctly, the refund claim was proposed to be rejected.

The adjudicating authority rejected the refund claim by classifying the service under the category of "Management Consultancy Services". Inasmuch it was held that the appellants were liable to pay service tax under the "reverse charge mechanism" in terms of Section 66A of the FA, 1994 and Taxation of Services (Provided from Outside India and received in India) Rules, 2006.

Aggrieved, the appellant filed an appeal before the Commissioner (Appeals). Revenue also filed an appeal contending that the refund claim was also liable to be rejected on time bar.

The Commissioner (Appeals) allowed the appeal filed by the appellant and rejected the one filed by the Revenue.

So, Revenue is in appeal before the CESTAT but only on the merits of the case and does not challenge the issue of time bar.

After considering the submissions, the Bench reproduced verbatim the findings of the Commissioner(A), paragraphs 15 to 22 and then observed –

"4.1 … it can be seen that the learned Commissioner (Appeals) has conclusively decided the classification of the service under "Technical inspection and certification services" and held that it neither falls under "Consulting Engineers Service" as alleged in the show-cause notice nor under "Management Consultancy Service" as held in the order-in-original. On perusal of the grounds of appeal, we find that the Revenue has challenged the impugned order only on the ground that the learned Commissioner has decided the service tax payment of Rs.40,79,122/- without any documentary evidence that whether the service related thereto was provided prior to 18/04/2006 or thereafter. However, the Revenue in the grounds of appeal did not raise the issue of classification. Therefore, the classification of the service decided by the learned Commissioner under "Technical inspection and certification" attained finality. As per the fact, the said technical and inspection service was admittedly provided by the foreign service provider based in Germany in Amur Shipbuilding Plant at Russia on behalf of the respondent. Therefore, the service was wholly performed by M/s. Schiffko GMBH, Germany at Russia, no part of such service was performed in India. Therefore, in terms of Rule 3 (ii) of Taxation of Services (Provided from outside India and received in India) Rules, 2006, service is not taxable in the hands of the respondent under the reverse charge mechanism. Accordingly, we do not find any infirmity in the impugned order, since the service itself is not taxable, whether it is provided prior to 18/04/2006 or thereafter does not make any difference as the service remains non-taxable throughout the relevant period… ."

By upholding the order-in-appeal, the Revenue's appeal was dismissed.

(See 2017-TIOL-3689-CESTAT-MUM)