2011 (1) TMI 461 - HC - Service Tax

Business Auxiliary Service (BAS) - marketing / distribution of pharmaceutical products - commission agent outside India - Import of service - held that - from 18-4-2006 the service provided by a person who is outside the country and who has no fixed establishment or permanent address in the country, such a taxable service shall be treated as if the recipient of service had himself provided the service in India and accordingly all the provisions of this Chapter shall apply. Therefore, prior to 18-4-2006 the service tax was not payable by the recipient, in the event the service provider was outside the country and he had no permanent address or place of business within the country. - Not liable to tax during the relevant period.

Issues:
1. Interpretation of service tax liability on the recipient of services provided from abroad.
2. Application of Notification No. 36/2004 ST and subsequent amendments.
3. Analysis of section 66A and its impact on service tax liability.

Issue 1: Interpretation of service tax liability on the recipient of services provided from abroad
The case involved a dispute regarding the service tax liability on the recipient of services provided from abroad. The Tribunal held that the service tax liability on the recipient of the services arises only from 18-4-2006, setting aside the service tax liability imposed on the assessee for the period from 9-7-2004 to 31-3-2006. The assessing authority had imposed the liability on the assessee for receiving taxable services from overseas commission agents. However, the Tribunal relied on judgments from the High Courts of Bombay and Delhi to determine the timing of service tax liability on the recipient.

Issue 2: Application of Notification No. 36/2004 ST and subsequent amendments
The revenue contended that Notification No. 36/2004 ST, dated 31-12-2004, specified that any taxable service provided by a person from outside India, without an office in India, makes the recipient in India liable to pay tax from January 2005. The revenue argued that the Central Government had the power to issue such notifications, contrary to the judgment of the Bombay High Court. The assessee, however, relied on the same judgment to contest the liability imposed on them, emphasizing that until the introduction of section 66A, there was no liability on the recipient of tax.

Issue 3: Analysis of section 66A and its impact on service tax liability
The introduction of section 66A by the Finance Act, 2006, effective from 18-4-2006, clarified the charge of service tax on services received from outside India. This section specified the conditions under which a service provided from abroad would be treated as a taxable service, making the recipient liable for the tax. The judgment highlighted that prior to 18-4-2006, service tax was not payable by the recipient if the service provider was outside the country and had no permanent establishment within the country. The order passed by the appellate authority, based on the judgments of the Bombay and Delhi High Courts, was upheld, dismissing the appeal due to lack of merit.

In conclusion, the judgment provided a detailed analysis of the service tax liability on recipients of services provided from abroad, the application of relevant notifications, and the impact of section 66A on determining the timing of service tax liability.

← Previous Next →