2010 (12) TMI 264 - AT - Service Tax

Services of foreign agent in connection with procurement of orders and in respect of other activities of their business - recipients of services from Foreign Service provider cannot be subjected to liability to tax prior to 18.4.06 i.e. prior to introduction of Section 66A in the Finance Act, 2006 Appeal rejected

Summary

Issues involved:
- Service tax liability on the recipient of services prior to the introduction of Section 66A of Finance Act, 2006.

Analysis:
The case involved an appeal against the order of the Commissioner (Appeals) regarding the service tax demand on the recipient of services prior to the introduction of Section 66A of the Finance Act, 2006. The respondent, a manufacturer of excisable goods, had availed services of a foreign agent for various business activities. The original authority had confirmed the service tax demand along with interest and penalty. However, on appeal, the Commissioner (Appeals) set aside the order, stating that recipients of services are not liable to pay service tax before 18.4.06.

During the hearing, the Departmental Representative (DR) argued that the tax liability was on the recipient from 16.8.2002 based on Notification No.12/2002-ST. The DR referred to a case law to support their argument. On the other hand, the Advocate for the respondent cited the decision of the Honorable Bombay High Court, which held that the department did not have the legal authority to levy service tax on the recipient before the introduction of Section 66A in the Finance Act, 2006 on 18.4.2006. The Advocate also mentioned a case from the Honorable Punjab & Haryana High Court supporting the same principle.

After considering the submissions and cited decisions, the judge noted the consistent rulings of the Honorable Bombay High Court and the Honorable High Court of Punjab and Haryana. These courts had held that recipients of services from foreign service providers could not be held liable for tax before 18.4.06, prior to the introduction of Section 66A in the Finance Act, 2006. Therefore, the judge concluded that there was no valid reason to interfere with the order of the Commissioner (Appeals) and rejected the appeal.