2010 (1) TMI 1126 - HC - VAT and Sales Tax

Whether the service has to be treated as taxable service in India and the petitioner is not liable for service tax as it is shown in the impugned show-cause notice issued by the respondent? Held that - Be that as it may, now as it is stated by the learned counsel for the petitioner, the legal position is clear as per the Rules. Accordingly, the writ petition is disposed of with a direction to the petitioner to give objections to the impugned show-cause notice of the respondent dated August 14, 2009 in the light of the legal position and if the petitioner submits such objections within a period of one week from the date of receipt of a copy of this order, the respondent shall pass final orders taking note of the above legal position within a period or four weeks thereafter.

Summary

Issues:
Challenge to show-cause notice for service tax demand under Finance Act, 1994.

Analysis:
The writ petition challenges a show-cause notice issued under the Finance Act, 1994, demanding an amount from the petitioner towards service tax, interest, and penalties. The petitioner, a dealer in computer software, argues that the service should not be taxable in India as per the impugned notice. The petitioner relies on the Taxation of Services Rules, 2006, specifically the second proviso, which deems certain services performed in India even if not physically done in India. The petitioner contends that they are not liable for service tax based on this rule.

The petitioner's counsel cites a Division Bench judgment of the Bombay High Court in a similar case, where it was held that the government cannot shift the levy of service tax to recipients of services. The counsel highlights the significance of the Supreme Court's ruling in a related case, emphasizing that before the enactment of a specific section, the authorities did not have the legal authority to levy service tax on Indian residents receiving services from abroad. The counsel argues that the legal position is now clear post the enactment of section 66A, making Indian recipients of taxable services liable for service tax.

Moreover, the counsel mentions a similar view taken by the Delhi High Court in another case. Despite a special leave petition filed against the Bombay High Court's judgment, the Supreme Court dismissed it. The counsel asserts that based on these legal precedents and the current legal framework, the impugned show-cause notice should be set aside. The court disposes of the writ petition with a direction for the petitioner to submit objections to the notice within a week, following which the respondent must pass final orders within four weeks, considering the legal position discussed.

In conclusion, the judgment addresses the challenge to the show-cause notice for service tax demand under the Finance Act, 1994, emphasizing the legal provisions, precedents, and the necessity for the respondent to review the petitioner's objections in light of the established legal position.