SUPREME COURT OF INDIA
Kerala
State Electricity Board
v.
Commissioner
of Central Excise, Thiruvananthapuram
Section 68 read with section 75 of the Finance Act, 1994 and rule 6 of the Service Tax rules, 1994 - Payment of service tax - Period August 1998 to September 2002 - Appellant-state electricity board entered into an agreement with a foreign company in relation to various projects for obtaining consultancy service from said company - Service provider did not have any independent office, and it was appellant who provided space and accommodation to foreign company in their office premises and borne expenditure related thereto - Terms of agreement entered into by and between assessee and foreign company, at all material time, showed that responsibility of meeting service tax liability was on service recipient – Whether despite amendment of Rule 6 (1) with effect from 16-8-2002, agreement in issue still held good as service recipient being appellant had taken up responsibility of meeting liability of foreign company - Held, yes - Whether liability being that of appellant, it must accept liability of payment of interest too which was leviable thereupon in terms of statute occasioned by breach on its part to deposit amount of tax within prescribed time - Held, yes [Paras 14 to 18]
The appellant State electricity board entered into an agreement with a foreign company in relation to various projects for obtaining consultancy service from that company. The appellant failed and/or neglected to pay service tax on behalf of the said foreign company. A limited notice was issued to the effect as to that the appellant State Electricity Board, the service recipient, within the meaning of provisions of Finance Act, 1994, was liable to pay interest on the amount of tax due. It, on the other hand, raised a dispute that having regard to the purported statutory obligations of the service provider as contained in the Act and the Rules framed, it was not liable to pay any service tax. The High Court, construing the provisions of the Act in the light of the terms of the contract entered into by and between the appellant and the foreign company, opined that the liability in that regard was on the assessee and not on the foreign company.
On appeal to the Supreme Court:
Sub-rule (1) of Rule 6 of Service Tax Rules, as applicable at the relevant time, stipulated that in case of a person who was from outside India and did not have any office in India, the service tax due on the service rendered by him should be paid by such person or on his behalf by any other person authorized by him should submit to the Commissioner of Central Excise in whose jurisdiction the taxable services have been rendered by him a return containing specific details with necessary enclosures. [Para 12]
Furthermore, in terms of the proviso appended to sub-rule (1) of Rule 6 of Service Tax Rules, it was provided that in case of a person who was a non-resident or was from outside India and who did not have any office in India, the service tax due on the service rendered by him should be paid by such person or on his behalf by another person authorized by him who should submit to the Commissioner of Central Excise in whose jurisdiction the taxable services had been rendered, a return containing specific details with necessary enclosures. [Para 13]
The High Court had arrived at a finding of fact that the foreign company did not have any office in India. It was not in dispute that the terms of the agreement entered into by and between the assessee and foreign company at all material time, show that the responsibility of meeting the service tax liability was on the service recipient and despite the amendment of Rule 6 (1) with effect from 16-8-2002 agreement still held good as the service recipient being the assessee had taken up the responsibility of meeting the liability of the foreign company. [Para 14]
The said contract obligated the foreign company responsible only for filing of returns, estimates, accounts, information and details complete and accurate in all respects as may be required by any law or regulation. Only in the event the foreign company did not comply with the said requirements resulting in imposition of any penalty, interest or additional liability, the same shall be borne by it. That agreement did not cast any obligation upon the foreign company to make the payment of tax; the same is being the liability of the assessee. [Para 15]
If the assessee itself was liable for payment of tax, it was also liable for payment of statutory interest thereupon, if the same had not been deposited within the time stipulated by the statute. The liability to pay tax was not on the foreign company. Only on default on the part of the assessee the interest was leviable. The assessee was clearly liable therefor. In other words, the liability being that of the assessee, it must accept the liability of payment of interest leviable thereupon in terms of statute occasioned by the breach on its part to deposit the amount of tax within the prescribed time. [Para 16]
Proviso appended to Rule 6 which has been inserted with effect from 28-2-1999 cast a liability upon a person authorized by the foreign company to do it in that behalf. The details were to be furnished by a person who was authorized. Clause (2) of the proviso provides for submission of the demand draft within 30 days from the date of raising the bill. The assessee being the person authorized to make payment of the service tax, Section 75 would come into operation in the event of its failure to do so. [Para 17]
Further it was noticed that it was the assessee who had provided space and accommodation to the personnel of said foreign company in their office premises and borne expenditure related thereto. The service provider did not have any independent office. [Para 18]
Therefore, no case was made out for interference with the impugned judgment of the High Court. [Para 21]
The appeal was to be dismissed.