2010 (10) TMI 242 - AT - Service Tax

Import of service - reverse charge - Circular dated 30-6-2010 in F.No. 275/7/2010 CX. 8A - liabiity arises only w.e.f. 18-4-2006.

Summary

Issues:
Challenge to vires of Section 66A of the Finance Act, 1994 and show-cause notice issued under the provision.

Analysis:
The case involved writ petitions filed by a Society challenging the validity of Section 66A of the Finance Act, 1994, and the related show-cause notice. The Court did not grant a stay on the matter pending the writ petition. A counter affidavit was filed justifying the show-cause notice and the provision. The issue raised in the writ petition had been addressed previously by the Division Bench of the Bombay High Court and subsequently by the Supreme Court. The Supreme Court had dismissed the Leave Appeal filed by the Union of India on the matter. Following the Supreme Court's order, the Government of India issued a circular directing authorities to abide by its terms for future assessments, specifying the liability for service tax in cases involving non-resident service providers.

The circular clarified that service tax liability arises on a reverse charge basis for taxable services provided by non-residents without an office in India and received in India from January 1, 2005. For taxable services received outside India by residents or those with a business establishment in India, the liability arises from April 18, 2006. The circular highlighted instances where the ratio decidendi of previous judgments had been wrongly applied, leading to disputes regarding service tax liability. The field formations were directed to defend the levy of service tax on services received in India from non-residents on a reverse charge basis from January 1, 2005, based on previous Supreme Court judgments.

In light of the Bombay High Court's Division Bench judgment, the Court found that the writ petitions were liable to be rejected. The liability of the petitioners was determined to be applicable only from April 18, 2006. Consequently, both writ petitions were dismissed without costs, along with connected miscellaneous petitions.