ORDER
M.V. Ravindran, Member (J)
1. This appeal is directed against the order-in-appeal dated 19.04.2006 that upheld the order-in-original vide which the refund claim filed by the appellant was rejected.
2. The relevant facts that arise for consideration are that the appellant filed a refund claim of Rs. 1,47,358/- in respect of the amount paid by them as Service Tax for the period October, 2003 to November, 2003 in respect of the services received by them from a non-resident engineering consultants. A show cause notice was issued to the appellant proposing to reject the refund claim on the ground that the Service Tax paid by the appellant is correct and the appellant being a service receiver has correctly paid the amount as service tax. Appellant resisted the show cause notice mainly on the ground that they are not liable to pay the service tax as per the provisions of the Section 68 of The Finance Act, 1994 and the amount paid by them is not in accordance with the law, and hence, the same is refundable. Adjudicating authority did not accept the contentions of the appellant and rejected the refund claim, Appeal of the appellant also met with the same fate. Hence, appellant has preferred this appeal.
3. The learned advocate appearing for the appellant submits that the statute envisages the payment of service tax by the service provider and the service receiver’s liability of payment of service tax arises only after the Government notifies the services. It is his submission that the service tax liability on the receiver of services from non-resident, was brought in to statute by the Notification No. 36/2004 – S.T. dated 31.12.2004. It is his submission that the appellant were never authorized by the non-resident consultant to pay the service tax on their behalf and hence the appellant could not be made liable to pay the service tax. Having paid the amount as tax inadvertently the appellant has claimed the refund of the duty. He relies upon the decision of the Tribunal in the case of CCE. Noida v. Motherson Sumi systems as reported at 2006 (1) S.T.R, 307 (Tri.Del), for the proposition that the appellant is not a authorized representative to pay the Service Tax on behalf of the non-resident
4. Learned Senior Departmental Representative, on the other hand, submits that the service tax paid by the appellant is in accordance with the law. It is his submission that the appellant’s liability to pay the service tax arose under the provisions of Rule 2(d)(iii) of the Service Tax Rules. It is his submission that the Service Tax paid by the appellants, was on their own volition and hence now cannot claim the refund of the amount paid voluntarily by them. He relies upon the decision of the Tribunal in the case of J.K. Industries Ltd. v. CCE, Indore as reported at 2006 (3) S.T.R. 14 (Tri. Del) for this proposition.
5. Considered the submissions made at length by both sides and perused the records. It is undisputed that the appellant is receiver of the services from a engineering consultant, who does not have a office in India. It is also undisputed that the service provider is based at a foreign country and is non-resident. It is also not in dispute that the appellant had discharged the Service Tax based upon his own understanding of the law, as it existed on that day. Refund is due to an assesee, if an assesee pays an amount as tax under mis-understanding of the law, which if he is not liable to pay, is now a well settled law. It is also settled law that the government cannot keep with itself the amount that is not due to it. Hence, the refund claim in this case can be entertained for processing. In order to appreciate liability in relation to specified services that may be notified by the Central Government. The Central Government vide Notification No. 36/2004 – S.T. dated 31.12.2004 notified the following service receivers as liable to pay the service tax:
Service tax payment in relation to specified services
In exercise of the powers conferred by Sub-section (2) of Section 68 of the Finance Act, 1994 (32 of 1994), the Central Government hereby notifies the following taxable services for the purposes of the said sub-section, namely:
(A) the services,-
(i) in relation to a telephone connection or pager or a communication through telegraph or telex or a facsimile communication or a leased circuit;
(ii) in relation to general insurance business;
(iii) in relation to insurance auxiliary service by an insurance agent; and
(iv) in relation to transport of goods by road in a goods carriage, where the consignor or consignee of goods is,-
(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);
(b) any company established by or under the Companies Act, 1956 (1 of 1956);
(c) any corporation established by or under any law;
whether the appellant has paid the service tax in accordance of the law or not, it is necessary to read the relevant provisions. The duty of payment of Service Tax on the services provided, is under Section 68 of The Finance Act, 1994, which reads as under:
Payment of service tax:
(1) Every person providing taxable service to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in Sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall paid by such person and in such manner as may be prescribed at the rate specified in Section 66 and all the provisions of this chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
6. It can be noticed from the above-reproduced section that under Sub-section (1), it is for the provider of taxable services to pay the service tax. In the case before me it is undisputed that the appellant is not a service provider hence, the provisions of Sub-section (1) will not apply. The framers of the law envisaging a situation that the service receiver may also be made liable to pay the Service Tax on the services received by them, cawed out an exception under Sub-section (2) of Section 68. The said Sub-section (2) mandates the service receiver to discharge the service Tax (sic)
(d) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;
(e) any co-operative society established by or under any law;
(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or
(g) any body corporate established, or a partnership firm registered, by or under any law;
(B) any taxable service provided by a person who is a non-resident or is from outside India, does not have any office in India.
2. This notification shall come into force on the first day of January, 2005.
[Notification No. 36/2004-S.T., dated 31.12.2004]
[emphasis supplied]
7. It is seen from the above said notification that the service receivers of the services provided by the non-resident was notified by the Central Government as liable to pay the Service Tax from 1st January, 2005. This would indicate that prior to this date, a service receiver from the nonresident service provider was not liable to pay the service tax. If that be so, it is seen from records, that in this case the services were received by the appellant from the non-resident prior to the date of this notification.
8. It was the contention of the learned Senior Departmental Representative that Rule 2(d)(iii) of the Service Tax Rules granted them the powers to collect the service tax from the appellant. During the period the said rule read as under:
2(d)(iii) “in relation to any taxable service provided by a person who is a non-resident or is from outside India, does not have any office in India, the person receiving taxable service in India;
9. It can be seen from the above-reproduced rule that it was in context of the definition of “person liable for paying the Service Tax”. This provision in itself may not suffice revenue to direct the appellant to discharge the service tax liability as service receiver, on the face of the fact that notification under Section 68(2) of The Finance Act, 1994, was issued by the Central Government only on 31st December 2004. If the contention of the learned SDR is to be accepted, then there was no necessity for the Government to issue Notification No. 36/2004-ST notifying the Service receiver from non-resident having no office, to pay Service tax as receiver. By issuing the said Notification, Central Government intended to tax the service receiver from non-resident, with effect from 1st January, 2005, which, in corollary would be that no Service tax is payable by this category prior to 1st January, 2005. If that by so, then the amount paid by the appellant is not a tax, which the revenue cannot keep with it.
10. As regards the case law as relied upon by the learned Senior Departmental Representative, it is seen that the said decision was rendered in the case of recipient of services of the GTO, which was made taxable by retrospective amendment. In this case, no such retrospective amendment was brought to notice of the Bench by either side.
11. It is well settled law that the rules are subservient to the sections and if section do not provide for discharge of tax by the recipient of services from non-resident having no office, then it would be a futile exercise to rely upon the rules to collect the tax.
12. In this case, it on record that the appellant received the services from the non-resident service provider before 31st December 2004. In the facts and circumstances of the case, the impugned order rejecting the refund claim of the appellant is not proper and is liable to be set aside, I do so. Appeal allowed with consequential relief, if any.
(Pronounced on 01/02/07 in the open Court)