Paramount Communications Ltd. v. CCE

FINANCE ACT, 1994

--Import of service--Assessee received services from abroadLevy of service tax under reverse charge mechanism----Where assessee availed of services of foreign based agencies for receiving external foreign commercial borrowings (ECB) from abroad, it was liable to pay service tax, as the value of services received by it was from abroad.--Assessee engaged Elara Capital and other agencies for arranging external commercial borrowings to raise funds for diversification/expansion of their business activities in India. Revenue contended that as per the provisions of section 66A of the Finance Act, 1994 read with rule 2(1)(4) of Service Tax Rules, 1994, and read with rule 3 of Taxation of Services (Provided from Outside and Received in India) Rules 2006, the assessee should have paid service tax on the amount of commission paid by it to the foreign based service provider under Reverse Charge Mechanism basis. Assessee contended that it had received the taxable service not in India but abroad and it had also consumed abroad and therefore, service tax on commission paid by it to foreign based service provider was not payable on reverse charge mechanism basis. Held: As per the provisions of section 66A of the Finance Act, 1994 read with rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, assessee should have discharged their service tax liability in India, on the amount of commission paid by it as the value of services received by them from abroad. Thus, assessee was liable to pay service tax on service of foreign institutions availed of in getting their ECBs.