MIS. KERALA STATE ELECTRICITY BOARD versus COMMR. OF CENTRAL EXCISE, THIRUVANANTHAPURAM

Citation: [2007] 13 S.C.R. 420 · Decided: 12-12-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

L 
A 
MIS. KERALA STATE ELECTRICITY BOARD 
• 
v. 
COMMR. OF CENTRAL EXCISE, THIRUV ANANTHAPURAM 
DECEMBER 12, 2007 
B 
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.] 
Service Tax Rules, 1994-r. 6 (1)-Service tax-On Consultancy 
c 
Engineering Services-Payment of interest on the tax due-Whether 
on service recipient or service provider-Contract between service 
recipient and service provider (a foreign company) fixing the liability 
on the recipient-Service provider not having its office in Jndia~Held: 
In view of the agreement and provisions of law, liability to pay the tax 
was on the service recipient-Consequently liability to pay statutory 
D interest on the due tax was also on the service recipient-Finance Act, 
1994-s. 75. 
Appellant entered into an agreement with a foreign company for 
obtaining consultancy services from them. Under the agreement, the 
E liability to pay the service tax on behalf of the foreign company was fixed 
on the appellant. Despite the agreement, appellant neglected to pay 
service tax on behalf of the foreign company. It raised a dispute that in 
view of the statutory obligations of service provider as contained in 
Finance Act, 1994, it was not liable to pay the same. High Court by its 
F impugned order held that in view of the provisions of the Act and the 
terms of the contract, appellant was liable and notthe foreign company. 
Hence the present appeal. 
Dismissing the appeal, the Court 
G 
HELD: 1. In terms of the proviso appended to sub-rule (1) of Rule 
6 of Service Tax Rules, it is provided that in case ofa 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 
H 
420 
i 
KERALA STATE ELECTRICITY BOARD v. COMMR. OF 421 
CENTRAL EXCISE, THIRUV ANANTHAPURAM 
· paid by such person or on his behalf by another person authorized by A 
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. The High Court has arrived 
at a finding of fact that the foreign company did not have any office in 
India. The terms of the agreement entered into by and between the B 
appellant 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) of the Rules w.e.f. 
16.8.2002, agreement still held good as the service recipient being the 
appellant had taken up the responsibility of meeting the liability of the C 
foreign company. [Paras 13and14) [426-G,H; 427-A-B] 
2. If appellant 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. Proviso appended D 
-1 
to Rule 6 of the Rules which has been inserted w.e.f. 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 
within30 days from the date of raising the bill Appellant being the person E 
authorized to make payment of the service tax, Section 75 of Finance 
Act, 1994 would come into operation in the event ofits failure to do 
so. [Paras 16and17) (427-E; G-H) 
Gujarat Ambuja Cements Ltd andAnr. v. Union of India andAnr., 
(2005) 4 SCC 214, relied on. 
F 
Commissioner of Central Excise, Meerut -11 v. L.H Sugar Factories 
Ltd and Ors., (2005) 13 SCC 245, distinguished. 
Laghu Udyog Bharati andAnr. v. Union of India and Ors., [1999) 6 
SCC 418, held inapplicable. 
G 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5832 of 
2007. 
From the Judgment and Order dated 25.07.2006 of the High Court 
H 
422 SUPREME COURT REPORTS 
[2007] 13 (Addl.) S.C.R. 
A ofKerala at Emakulam in C.E. Appeal No. 26 of2005. 
B 
T.L.V. Iyer, M.T. George for the Appellant. 
R.G. Padia, Navin Prakash and B. Krishna Prasad for the 
Respondent. 
The Judgment of the Court was delivered by 
S.B. SINHA, J. Leave granted. 
1. A limited notice was issued to the effect as to whether the 
C appellant-Kerala State Electricity Board, the service recipient, within the 
meaning of provisions of Finance Act, 1994, levying service tax, is liable 
to pay any interest on the amount of tax due to the respondent. 
2. The question involved in this appeal 

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