2011 (6) TMI 363 - AT - Service Tax

Business auxiliary services - Services received from foreign agents - Appellants challenged the levy of Service Tax for the period 16.6.05 to 31.12.05 not liable to pay Service Tax prior to 18.4.2006 when section 66A was introduced in the Finance Act enabling fastening of liability on the recipient of Services - Held that - As decided in Indian National Shipowners Association vs. Union of India 2008 (12) TMI 41 - HIGH COURT OF BOMBAY that before enactment of Section 66A it is apparent that there was no authority vested by law in the Respondents to levy service tax on a person who is resident in India, but who receives services outside India - As the demand of Service Tax relating to period 16.6.2005 to 31.12.2005 on the recipients is clearly not sustainable - Decided in favour of assessee.

Summary

Issues:
1. Challenge to the levy of Service Tax on the recipient for a specific period.
2. Interpretation of Section 66A of the Finance Act.
3. Applicability of Service Tax on services received from foreign agents.

Analysis:
1. The appellant received business auxiliary services from foreign agents without offices in India for procuring overseas orders for export. The original authority confirmed a Service Tax demand of Rs.73,380 and imposed penalties. The Commissioner (Appeals) upheld this order.

2. The appellants contested the levy of Service Tax for the period before the introduction of Section 66A on the ground that recipients were not liable before 18.4.2006. The learned DR cited a Tribunal's Larger Bench decision in Hindustan Zinc Ltd., arguing for tax liability from 1.1.2005. However, the Tribunal clarified that the Hindustan Zinc case did not cover the period post-1.1.2005 and did not consider Section 66A's enactment.

3. The Tribunal referred to a Bombay High Court case, Indian National Shipowners Association vs. Union of India, stating that before Section 66A's enactment, there was no legal authority to levy Service Tax on residents receiving services from abroad. Consequently, the demand for Service Tax from 16.6.2005 to 31.12.2005 on the recipients was deemed unsustainable. The impugned order was set aside, and the appeal was allowed with appropriate relief as per law, disposing of the stay petition.