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2012 (9) TMI 633 - HC - Service TaxLevy of Service Tax on reverse charge basis on Import of Service Held that - Provisions of Rule 2(1)(d)(iv) cannot create any tax liability which is not authorized by law. Before insertion of section 66A with effect from 18-4-2006, there was no authority to levy service tax on Import of service. Explanation below section 65(105) did not give any authority to levy service tax on import of services held in case Bombay High Court in the case of Indian National Ship owners Association (2008 (12) TMI 41) also affirmed by the Apex Court. In view of the aforementioned judgments of the Hon ble Supreme Court, the service tax liability on any taxable service provided by a non resident or a person located outside India, to a recipient in India, would arise w.e.f. 18.4.2006, i.e., the date of enactment of section 66A of the Finance Act, 1994. The Board has accepted this position. Accordingly, the instruction F No. 275/7/2010- CX8A, dated 30.6.2010 stands rescinded. Decision in favour of assessee
Issues Involved:
1. Applicability of service tax on services provided by non-resident commission agents to an Indian recipient before and after the enactment of Section 66A of the Finance Act, 2006. 2. Validity of the Tribunal's decision based on the Bombay High Court's ruling in Indian National Shipowners Association v. Union of India. 3. Legality of the imposition of service tax on the recipient of services from abroad prior to the enactment of Section 66A. Detailed Analysis: 1. Applicability of Service Tax on Services Provided by Non-Resident Commission Agents: The respondents, engaged in manufacturing diagnostic kits, received services from Overseas Commission Agents, which fall under "Business Auxiliary Services." Initially, these services were exempt from service tax per Notification No. 13/2003/ST, but became taxable after Notification No. 8/2004-ST. Since the agents were non-residents without an office in India, the liability to pay service tax was on the respondents under Rule 2(d) read with Rule 6 of the Service Tax Rules, 1994. A show cause notice was issued demanding service tax for the period from 9.7.2004 to 31.3.2006. 2. Validity of the Tribunal's Decision: The Commissioner (Appeals) and the Tribunal held that service tax on services received from foreign providers could not be recovered from the Indian recipient before 18.4.2006. This decision relied on the Bombay High Court's ruling in Indian National Shipowners Association v. Union of India, which stated that service tax could not be levied on service recipients in India for services provided by non-residents before the enactment of Section 66A of the Finance Act, 2006. The Tribunal dismissed the department's appeal, affirming the appellate commissioner's order. 3. Legality of Imposition of Service Tax Prior to Enactment of Section 66A: Section 66A of the Finance Act, 2006, effective from 18.4.2006, made services received from abroad taxable in the hands of Indian recipients. The Bombay High Court in Indian National Shipowners Association held that before this enactment, there was no legal provision to levy service tax on Indian recipients for services provided by non-residents. The Supreme Court upheld this view, affirming that service tax could only be levied after the enactment of Section 66A. The Central Board of Excise and Customs also issued a circular accepting this legal position, stating that service tax liability on services provided by non-residents to Indian recipients arises only from 18.4.2006. Conclusion: The High Court dismissed the tax appeal, agreeing with the Tribunal and the Bombay High Court's interpretation. It confirmed that no substantial question of law arises, as the legal position was clear that service tax on services provided by non-residents to Indian recipients could only be levied from the date of enactment of Section 66A, i.e., 18.4.2006. The parties were directed to bear their own costs.
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