R.K. Abichandani, J. (President)

1. This group of ten appeals raises common questions and common contentions have been canvassed by both the sides.

2. The Revenue has filed Service Tax Appeal Nos. 169 to 173 of 2005 challenging the orders of the Commissioner (Appeals) by which the orders-in-original, to the extent of confirming the demand of Service Tax and imposing penalty on the recipient of service - Grasim Industries Limited, in India, was set-aside. The Original Authority had held that, the recipient of service, Grasim Industries Limited, (hereinafter referred to as Grasim), had contract/work orders. Since the services were received prior to 16.08.2002, even though it (Grasim) may not have been directly liable to pay the Service Tax at that relevant time, as a recipient it was liable, in view of the contract by which it had undertaken the liability to pay the tax which was payable by the service provider. In all these appeals filed by the Revenue, recipient of service, who, according to the Revenue, had undertaken the liability to pay Service Tax, is the respondent.

3. Service Tax Appeal Nos. 159 to 163 of 2005 have been filed by Calvin Wooding Consulting Ltd., Lenzing Aktiengeseooschaft, List AG, Jenewin & Partner, and Eurafrica S.A., against the orders of the Commissioner (Appeals) under which the liability of the service providers to pay the Service Tax was upheld and penalties imposed by the original authority were confirmed. All these appellants were service providers stationed abroad and engaged by the Indian party (Grasim) for receiving their service in India.

4. The main dispute centers around the liability to pay the Service Tax and penalty. On behalf of the appellants - service providers, it has been argued that, since they are non-residents and had done their activity in the foreign land, they were not amenable to the Indian law imposing Service Tax. The contention of the recipient of service, who was in India, was that, it was also not liable, because the recipients of services provided from abroad, were made liable for the first time from 16.08.2002 and, therefore, the Commissioner (Appeals) has rightly held them to be not liable.

5. The matters have been contested not on the issue of classification of service, but only on the issue, whether the foreign service provider could be held to be liable to pay service tax in respect of services provided to the customers in India with the recipient contending that they would not, in any event, be liable to pay the Service Tax because, only the service provider was liable to pay tax prior to 16.08.2002.

6. During the arguments before us, it transpired that in the show cause notices, which are the subject matter of Service Tax Appeal Nos. 159, 160 and 161 of 2005, filed by the service provider (and also of Service Tax Appeal Nos. 169, 170 and 171 of 2005 filed by the Revenue), the allegation was that, the service provider had provided "Consulting Engineer" service under Section 65(31) of Chapter V of the Finance Act, 1994. In the Service Tax Appeal No. 172 of 2005 (filed by the Revenue) and Service Tax Appeal No. 162 of 2005 (filed by the service provider), the show cause notices alleged that, the nature of service provided was "Management Consultancy", which is covered by Section 65(65) of the. However, both the sides have, after elaborate discussion and checking of the record, agreed that, the service provided in this matter was in the nature of manpower recruitment which is covered by Section 65(68) of the. It may, however, be noted here that, in the Appeal Memorandum filed by their service provider, there is a clear statement that, the nature of service provided by the appellant was that of Consulting Engineer. In the show cause notice, which is the subject matter of Service Tax Appeal No. 173 of 2005 (filed by the Revenue) and Service Tax Appeal No. 163 of 2005 (filed by the service provider), the allegation was that, the service rendered was that of Consulting Engineer, though in the appeal memo filed by the service provider, it is specifically admitted that, the service fell in the category of Consulting Engineer, and that it was received in India. Both the sides, after verifying the record have stated that, the service in this matter was in the nature of manpower recruitment which falls under Section 65(65) of the. Thus, there is no dispute, at this stage, about the nature of services which were rendered. The main dispute is, whether there was any liability on the part of the service provider to pay the tax and penalty, and equally, whether the recipient of service could be held liable for such tax and penalty, in view of the fact that the recipients were not liable in such cases prior to 16.08.2002.

7. In the order of the Commissioner (Appeals), which is challenged in Service Tax Appeal No. 161 of 2005 and Service Tax Appeal No. 169 of 2005, it was found that, under the contract between the service provider and the recipient for supervision of chemical start-up under Consulting Engineer Services for the period from April, 1999 to March, 2000, and April, 2000 to March, duties payable in India shall be borne by Grasim. The adjudicating authority had found that, the recovery could be made from the original noticee No. 2 (recipient of service Grasim) on the basis of the said contract dated 20th June, 1997, under which it was clearly mentioned that, the tax liabilities in India will be borne by Grasim. He, therefore, confirmed the demand of service tax of Rs. 18,590/-against the service provider, original noticee No. 1 (who is the appellant in Service Tax Appeal No. 161 of 2005), and imposed a penalty of the like amount. It was also ordered that, the amounts were recoverable from the service receiver Grasim, who was the original noticee No. 2 (who is the respondent in Service Tax Appeal No. 169 of 2005). The Appellate Commissioner, however, while confirming the liability of the original service provider (appellant in Service Tax Appeal No. 161 of 2005), set-aside the order of recovery of tax and penalty made against the noticee No. 2, Grasim (who is the respondent in Service Tax Appeal No. 169 of 2005).

8. The Service Tax Appeal Nos. 160 and 170 of 2005, challenge the order of the Commissioner (Appeals) confirming the liability of the service provider on the basis of the fact that, the Income Tax Deduction (TDS) was made from the consideration paid to the service provider. It was held by the adjudicating authority that, Service Tax was recoverable from the service provider for the period upto 15th August, 2002. From the fact that TDS amount was withheld under the Income Tax Act, from the consideration, the recipient of the service was liable for the Service Tax that became payable by the recipient under the contract. He, therefore, confirmed the demand of service tax of Rs. 31,012/-under Section 68 of theagainst the service provider, original noticee No. 1 (who is the appellant in Service Tax Appeal No. 160 of 2005), and imposed a penalty of the like amount. It was also ordered that, the amounts were recoverable from the service receiver, who was the original noticee No. 2 (who is the respondent in Service Tax Appeal No. 170 of 2005). The Appellate Commissioner, however, while confirming the liability of the original service provider (appellant in Service Tax Appeal No. 160 of 2005), set-aside the order of recovery of tax and penalty made against the noticee No. 2, Grasim (who is the respondent in Service Tax Appeal No. 170 of 2005). It appears that, in this matter, the terms and conditions of the contract were reflected in the order which was made on 11.05.1998 (Annexure A to the show cause notice), but there was no specific clause relating to deduction/payment of tax in respect of the said transaction. However, as per the debit advise of the Bank (Annexure C) TDS @ 20% appears to have been deducted and deposited by the service recipient from the amount which was payable to the service provider.

9. The Commissioner (Appeals), whose order is challenged in Service Tax Appeal Nos. 159 and 171 of 2005, while holding similar view to the effect that recipient of service was not liable, upheld the liability of the service provider for rendering service as Consultant Engineer. He, therefore, confirmed the demand of service tax of Rs. 12,954/- against the service provider, original noticee No. 1 (who is the appellant in Service Tax Appeal No. 159 of 2005), to the effect that the service provider was liable to pay tax under Section 73 and imposed a penalty of the like amount. Admittedly, there was no clause in the contract, which was the subject matter of these matters regarding the liability to deduct/pay taxes. It was ordered by the adjudicating authority that, the amounts were recoverable from the service receiver, who was the original noticee No. 2 (who is the respondent in Service Tax Appeal No. 171 of 2005). The Appellate Commissioner, however, while confirming the liability of the original service provider (appellant in Service Tax Appeal No. 159 of 2005), set-aside the order of recovery of tax and penalty made against the noticee No. 2, Grasim (who is the respondent in Service Tax Appeal No. 171 of 2005).

10. In the Service Tax Appeal Nos. 162 and 172 of 2005, the Commissioner (Appeals) while confirming the liability of the service provider, held in para 5 that: "....After going through the records and submissions, I am of the opinion that, the scope of service covered under the appeal was on account of Consulting Engineers and that the service provider was liable to pay service tax". He, however, held that, no recovery could be made for the period prior to 16.08.2002 from the service recipient and confirmed the demand of service tax of Rs. 48,290/- against the service provider, original noticee No. 1 (who is the appellant in Service Tax Appeal No. 162 of 2005), and imposed a penalty of the like amount. It was ordered by the adjudicating authority that, the amounts were recoverable from the service receiver, who was the original noticee No. 2 (who is the respondent in Service Tax Appeal No. 172 of 2005). The Appellate Commissioner, however, while confirming the liability of the service provider (appellant in Service Tax Appeal No. 162 of 2005), set-aside the order of recovery of tax and penalty made against the noticee No. 2, Grasim (who is the respondent in Service Tax Appeal No. 172 of 2005). It may be noted that, in the contract, under which the service was provided, which is the subject matter of these appeals, there was a stipulation in paragraph 4, inter alia, to the effect that, Grasim shall be responsible for all compliances required in relation to the payments including withholding tax and other applicable taxes requirements. Therefore, the clause was not confined only to withholding taxes, but extended also to all other applicable taxes, which were required to be paid as per this agreement by the recipient of service, Grasim.

11. The Commissioner (Appeals), whose order is challenged in Service Tax Appeal No. 173 and 163 of 2005, while holding similar view to the effect that recipient of service was not liable, upheld the liability of the service provider for rendering service as Consultant Engineer. He, therefore, confirmed the demand of service tax of Rs. 47,030/- against the service provider, No. 163 of 2005), to the effect that the service provider was liable to pay tax under Section 68 and imposed a penalty of the like amount. Admittedly, there was no clause, in the contract which was the subject matter of these matters, regarding the liability to deduct/pay taxes. It was ordered by the adjudicating authority that, the amount was recoverable from the service receiver, who was the original noticee No. 2 (who is the respondent in Service Tax Appeal No. 173 of 2005). The Appellate Commissioner, however, while confirming the liability of the service provider (appellant in Service Tax Appeal No. 163 of 2005), set-aside the order of recovery of tax and penalty made against the noticee No. 2, Grasim (who is the respondent in Service Tax Appeal No. 173 of 2005).

12. In the background of the above facts, it has been contended on behalf of the appellant - service providers, in Service Tax Appeal Nos. 159 to 163 of 2005 by the learned Counsel, who also appeared for the respondents - service recipients of Service Tax Appeal Nos. 169 to 173 of 2005, that the service providers in all these cases were outside India and were, therefore, not amenable to Indian laws. He submitted that, since they provided service from abroad, they were not liable to pay service tax imposed under the Indian laws. He relied upon the Circular dated 08.10.2001 in which it was clarified that, services provided beyond the territorial waters of India, were not liable to service tax as provisions of Service Tax have not been extended to those areas. He then argued that, so far as appellants of Service Tax Appeal Nos. 162 and 163 of 2005 are concerned, they had provided the service of "manpower recruitment" because they were required to search and recruit Chief Process Manager - Lyocell, Lyocell Technology/Engineers - Technologists). He submitted that, their services were performed abroad because the search for the purpose of recruitment was carried out in Austria and France. He relied upon the Interim Order in Philcorp Pvt. Ltd. v. Commissioner of Central Excise & Customs, Goa reported in 2007 (5) STR 307 (T--Mum), pointing out that, where the demand was for the period prior to 16.08.2002, it was observed in para 3 of the order that, the appellant had a good, prima facie, case on merits inasmuch as the demand had been confirmed against a Singapore firm not falling within the jurisdiction of Service Tax authorities in India. Needless to say that, when an Interim Order is not binding in finally deciding the very appeal in which it is passed, it can hardly constitute a binding precedent. The learned Counsel also relied upon the decision in Motherson Pudenz Wickmann Ltd. v. Commissioner of Central Excise, Noida reported in 2006 (2) STR 63 (T), for the proposition that, the Commissioner cannot travel beyond the scope of the show cause notice. The learned Counsel submitted that, mere deduction of tax at source in the context of Income Tax Act, 1961, was no ground for holding that Service Tax was payable by these original noticees or any of them. He also submitted that, there was no specific authorization in favour of the recipient of service for payment of service tax and no such authorization can be implied. It was argued that, such an authorization creating liability to pay tax, was required to be explicit, and even Clause 4(b) of the Contract, which is the subject matter of Service Tax Appeal Nos. 169 and 161 of 2005, was not an express authorization for payment of Service Tax. He supported the reasoning of the Commissioner (Appeals) to the extent the orders-in-original against the services recipient are set-aside, and challenged the order of the Commissioner (Appeals) to the extent it upheld the liability of the service providers as adjudicated upon in the orders-in-original.

13. The learned authorised representative for the Department strongly contended that, service providers were liable to pay tax by virtue of the third proviso to Rule 4 and the second proviso to Rule 6 of the Service Tax Rules for the period prior to the amendment made on 16.08.2002. He argued that the service recipient was authorised to pay tax as per the terms of the contracts, which are the subject matter of Service Tax Appeal Nos. 169 and 161 of 2005 and Service Tax Appeal Nos. 172 and 162 of 2005. It was submitted that, even prior to 16.08.2002, the "authorized person" was liable to pay tax under the said Rules 4 and 6 when the service provider was a non-resident. In the matters in which there was no such tax deduction/payment clause, it was argued that, the inference of authorization can be drawn from the fact that, admittedly, the income tax was deducted at source by the service recipient, Grasim. In Service Tax Appeal Nos. 172 and 162 of 2005 as well as Service Tax Appeal Nos. 173 and 163 of 2005, it was argued that, mere wrong mention of the service in the show cause notice did not affect the liability. He pointed out from the appeal memos of the service providers in these two matters, that they had categorically admitted having rendered Consulting Engineers services and also the fact that such services were provided in India. He pointed out that, in all the appeal memos of these service providers, it was specifically stated that, the services rendered by them were of Consulting Engineers and that those services were received in India. There is no dispute over this fact which was evident, when the appeal memos were verified by both the sides during the hearing. The learned Authorized Representative for the Revenue further argued that, even if there was any error on the part of the Revenue in showing the classification, it was open for the Tribunal to correctly classify the service. He submitted that, in any event, since there was no dispute raised uptil now about the nature of service and the dispute had centred around only the question of liability to make the payment of service tax, the proceedings, on the basis of these two show cause notices, were not vitiated and that the said amounts were payable by way of service tax for the manpower recruitment service, which was rendered to Grasim by these appellants (Service Tax Appeal Nos. 162 & 163 of 2005).

13. The learned Authorised Representative for the Department relied upon the decision of the Kerala High Court in CCE, Thiruvananthapuram v. Kerala State Electricity Board reported in 2006 (3) STR 625 (Ken.), pointing out that, the Honble High Court, in the context of the question of the liability on the service receiver for the period prior to the amendment of Rule 6(1), on 16.08.2002, held that, as per the proviso to Sub-rule (1) of Rule 6 that came into force w.e.f. 28.2.1999, it was stipulated that, in case of a person, who was 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. He further relied upon the decision of this Tribunal in Indian Farmers Fertilizers Co-oP Ltd. v. CCE, Bareilly (UP) reported in 2007 (5) STR 281 (T-Del.), pointing out from para 17 of the judgment that, it was held in the context of the despatch of the designs etc. from abroad that, though the technical information in the form of drawings, designs as "goods" was despatched from abroad, the technical assistance which was agreed to be provided was to be rendered obviously in India at the plants of the assessee and that no technical assistance was to be rendered or could be considered to have been rendered at the place from where the post was despatched from abroad. He then, relied upon the decision of the Tribunal in Jindal Steel & Power Ltd. v. Commissioner of Central Excise, Raipur reported in 2006 (3) STR 481, pointing out from paragraph 11.1 of the judgment that, in a case where under the terms of the contract, the service tax was credited by the service recipient, it was held in the context of the provisions of Section 68 that, service tax payable in respect of taxable service, cannot become refundable merely because instead of the service provider collecting and crediting it to the Central Government, it was so credited by the recipient of service under their mutual arrangement. He also referred to the decision of the Honble Supreme Court in Voltas Ltd. v. Collector of Customs, Bombay reported in 1997 (91) ELT 261 (SC), in which it was held that, after having reached the conclusion that Tariff Heading 84.18(1) would have been the correct heading, there was no reason for the Tribunal merely to dismiss the appeals and uphold the Revenues contention. The Tribunal should have given a direction to make the assessment under the Heading 84.18(1), which, according to it, was the correct classification. He also placed reliance on the decision of the Tribunal in Glaxo Smithkline Consumer Healthcare Ltd. v. CCE, Gurgaon decided on 20th February, 2007, pointing out that, in a case where the show cause notices alleged that the services provided were in the nature of management consultancy, it was held that they would fall under the category of business auxiliary service and that the tax was correctly paid. It was also submitted that in O.K. Play (I) Ltd. v. Commissioner of Central Excise, Delhi-III (Gurgaon) reported in , in which the decision of the Honble Supreme Court in Voltas Ltd. was followed and it was held in paragraph 23 that, the Tribunal is competent to classify the goods under the Heading which it found to be more appropriate.

14. There is no dispute over the fact that the Service Tax was payable in respect of the type of services which were rendered by the service provider. The parties have all throughout concentrated on the issue, as to whether the service providers, who are non-residents, were liable to pay Service Tax. As noted above, in the show cause notices, which are the subject matter of all the appeals, except Service Tax Appeal Nos. 172 & 162 of 2005, the allegation was that, the service rendered was of Consulting Engineer. In all the appeal memos of the service provider, it was specifically stated, before this Tribunal, that the services rendered were provided to Grasim Industries Ltd. in India. In the statement of facts in all the appeal memos of the service provider, it is stated as follows:

The Service Provider, provided Services as a Consulting Engineer, as defined under Section 65(25) of the Finance Act, 1994, as existed at the relevant time, to M/s Grasim Industries Ltd., Staple Fibre Division, Birlagram, Nagda - 456 331 (M.P.) and hereinafter referred to as, the Service Enjoyer.

Again in all these appeal memos in the Grounds of Appeal, it has been specifically stated as under:

It is manifestly clear that the services were received by M/s Grasim Industries Ltd., in India.

15. The contention of the learned Counsel was that, these service providers were foreigners and that they cannot be held liable to pay service tax under the Indian law. In this context, we may refer to Section 66, which provides that, there shall be levied Service Tax at the rate mentioned therein of the value of the taxable services, referred to therein, which shall be collected in the manner as may be prescribed by the Rules. By Section 68 of the Act, it is provided that, every person providing taxable service to any person shall pay service tax at the rates specified in Section 66 in the manner and within such period, as may be prescribed by the Rules. Therefore, there is no distinction made between a foreigner and an Indian as regards the liability to pay Service Tax, when the taxable service is provided in India. There is no immunity to any foreigner from the applicability of the provisions of the said Act and foreigners and other non-residents were equally liable for the service tax when services were provided by them to a recipient in India. There is indeed no question of any extra-territorial operation of the statute involved in cases where service is provided by any person to a recipient of service in India.

16. Since the services were provided prior to 16.08.2002, we may refer to the rules relevant for payment of service tax in such cases. Prior to 16.08.2002, Rule 6, which related to payment of service tax, provided that, the Service Tax on the value of taxable services received during any calendar month, shall be paid to the credit of the Central Government by 25th of the month immediately following the said calendar month. As regards the liability of the non-resident, two provisions under the Rules may be noted: one relating to the requirement of registration; and the other having bearing on payment of service tax. These were contained in the third proviso to Rule 4(1) and the second proviso to Rule 6(1), the relevant parts of which are reproduced hereunder:

4 Registration. (1) Every person liable for paying the service tax shall make an application to the [concerned Superintendent of Central Excise] in Form ST-1 for registration within a period of thirty days from the date on which the service tax under Section 66 of the Finance Act, 1944 (32 of 1994) is levied:

Provided xxx xxx xxx

Provided xxx xxx xxx

Provided further that a person who is a non-resident or is from outside India, does not have any office in India, and is liable to pay service tax, may not make an application for registration if such persn pays the service tax on taxable service, rendered by him, under Rule 6.

6 Payment of Service Tax - (1) xxx xxx

Provided xxx xxx xxx

Provided further that, in the case of a person who is a non-resident or is from outside India, does not have any office in India and is liable to pay service tax on taxable services provided in India:

(i) the service tax thereon shall be paid by such person or on his behalf by any other person authorized by him, who shall submit to the Commissioner of Central Excise in whose jurisdiction the taxable services have been rendered, a return, containing the following details,.

[Emphasis Added]

17. From the above provisions, it is clear that, a nonresident service provider, if he pays Service Tax on such taxable services rendered by him under Rule 6, he need not apply for registration. This postulates that, every foreign service provider who renders taxable service to any person in India, would be liable to pay Service Tax, and that if he chose himself to pay it, he need not apply for registration. The second proviso to Rule 6(1) also contemplates that, a non-resident service provider who is liable to pay the service tax on taxable service provided in India, may pay such tax himself or he may authorize any other person to pay the same. If any other person is authorised by such foreign service provider, who is liable to pay Service Tax on taxable services provided in India, the person authorized is required to file a return giving the particulars mentioned in the said proviso, within 30 days from the date of raising of the bill and is required to deposit the tax as provided in Rule 6. It is thus clear that, neither the nor the Rules granted any immunity to the foreign service providers from payment of Service Tax in respect of taxable services provided by them in India.

18. In the present case, all the appellants of Service Tax Appeal Nos. 59 to 163 of 2005 are the non-resident service providers. So far as the Service Tax Appeal Nos. 159, 160 and 161 of 2005 are concerned, it is not contended that they did not provide taxable service in India. Even in the appeal memos of the other two appeals i.e. Service Tax Appeal Nos. 162 and 163 of 2005, the appellants have, in terms, stated that they had provided service to Grasim in India. Though, in their appeal memos, these appellants had admitted that, they had provided Consulting Engineers services, it was sought to be argued that, they had, in fact, provided "manpower recruitment" services and that for this purpose the search for engineers was done abroad in Austria and France because these appellants were functioning at those places and they had, therefore, performed these services abroad. It is difficult to agree with this submission for the simple reason that, the law reckons providing of taxable service in India and not any prior performance for the purpose of providing such services. Even if the search was made globally or anywhere else than in India, the recruitment was to be made in India and the service of providing the manpower was targeted to Grasim in India. Admittedly, Grasim received the benefit of these services. The service of providing manpower was not targeted towards any other country, because the selection and recruitment was required to be made for Grasim which was in India and not for any other person abroad. It cannot, therefore, be said that the services were provided by these appellants abroad. Their activity of searching manpower was a mere process for providing taxable service in India. Their performance of search abroad was not the same thing as providing taxable service in India. Performance of search activity preceded providing of taxable service in India. We are, therefore, of the opinion that, the authorities below were fully justified in holding that, all these service providers, who are the appellants in Service Tax Appeal Nos. 159 to 163 of 2005, were liable to pay Service Tax and penalty. All these appeals are, therefore, liable to be dismissed.

19. In the cluster of appeals filed by the Revenue, namely, Service Tax Appeal Nos. 169 to 173 of 2005, only in two appeals, namely, Service Tax Appeal Nos. 169 & 172 of 2005, clauses for tax payment were incorporated in the contracts and in none of the other appeals, the contract included such clauses. The clauses, relied upon in the contract, which were the subject matter of Service Tax Appeal Nos. 169 and 172 of 2005, were in the following words:

4. PRICE BASIS:

a. The price for equipment (duly packed in seaworthy conditions) is on FOB North Sea Port, according to INCOTERMS 1990. The price is FIRM and not subject to any escalation.

b. Taxes and Duties, if any, payable in Switzerland/outside India shall be borne by LIST. Taxes and Duties payable in India shall be borne by GRASIM Industries Limited (GRASIM).

4. PAYMENTS:

Grasim shall be responsible for all compliances required in relation to the payments contemplated above, including but not limited to exchange control regulations, withholding tax and other applicable taxes requirements.

All payments envisaged under this agreement shall be subject to all applicable laws in India.

These two clauses made Grasim undertake the responsibility to pay service tax and comply with all tax requirements. This was not confined only to withholding taxes, which are also mentioned specifically, but included all types of taxes which would include Service Tax. As noticed above, any person authorized by the service provider to pay the tax, who was a non-resident, was required to file a return and pay the tax under the second proviso to Rule 6(1). This liability existed prior to 16.08.2002. Such liability could arise in respect of any person authorized by the service provider to pay the Service Tax. Such authorization, in favour of any other person, by foreign service provider was a matter, distinct from the liability of the service recipient, which was introduced for the first time by virtue of the amendment made w.e.f. 16.08.2002. However, even a service recipient could be authorized by the service provider prior to 16.08.2002 to pay the service tax on his behalf. Such payment could be made under the arrangement between the foreign service provider and the person authorized, and in these two appeals, the person authorized happens to be recipient of service. The returns would in such cases be filed as "person authorized", and not by virtue of any liability of a service recipient which never was there, prior to 16.08.2002. Therefore, as per the arrangement stipulated in the contract, the Service Tax was required to be paid by Grasim, and the liability of Grasim as "person authorized" to file the return and deposit the tax arose by virtue of the second proviso to Rule 6(1) for the period prior to 16.08.2002. In those two appeals, therefore, the Commissioner (Appeals) has committed an error in not noticing the provisions of the second proviso to Rule 6(1) and setting-aside the order of the adjudicating authority against the respondents. Both the Service Tax Appeal Nos. 169 and 172 of 2005, filed by the respondent, who was the original noticee No. 2, will, therefore, have to "be allowed, restoring the orders-in-original against the respondent.

20. As regards the Service Tax Appeal Nos. 170, 171 and 173 of 2005, it is not disputed that, there was no such tax deduction/payment clause authorizing the respondent therein, original noticee No. 2, to pay service tax, which was payable by the foreign service provider in respect of taxable service, which was provided in India to Grasim. In the absence of any such authorization, which would have created a liability under the second proviso to Rule 6(1) to file the return and deposit the tax, the respondent in these appeals cannot be saddled with an obligation to pay service tax on behalf of a foreign service provider.

21. The liability of the recipient cannot arise merely from the fact that, the income tax was deducted at source, which was the requirement of the Income Tax Act, on the recipient who made payment to the foreign supplier. Such a statutory requirement, as exists under the Income Tax law on the person making the payment to deduct tax at source, as a tax collecting agency of the Revenue, does not exist under the provisions of the Service Tax law, and no obligation was cast upon the recipient of the service to make any deduction from the amounts payable by way of consideration, under the statutory provisions. Authorization to pay Service Tax under a contractual arrangement which obliged the recipient to pay the tax and file return, was a matter distinct and different from a statutory obligation to make tax deduction as a collecting agency, as envisaged under the Income Tax law. The Commissioner (Appeals) has, therefore, rightly set-aside the orders-in-original insofar as respondent of Service Tax Appeals Nos. 170, 171 and 173 of 2005 was concerned. All these three appeals of the Revenue, therefore, deserve to be dismissed.

22. For the foregoing reasons, we pass the following order:

(i) Service Tax Appeal Nos. 159 to 163 of 2005 are dismissed;

(ii) Service Tax Appeal Nos. 170,171 and 173 of 2005 are dismissed; and

(iii) Service Tax Appeal Nos. 169 & 172 of 2005 are allowed, and the orders-in-original stand restored against the respondent - original noticee No. 2.

(Dictated & pronounced in the open court)