2009 (4) TMI 10 - AT - Service Tax

Demands on Indian companies for tax on services of BAS received from persons abroad - held that it is only after enactment of Section 66A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents - Since Section 66A was introduced on 18.4.2006 much after the material period, the impugned order had to be sustained revenue s appeal rejected

Summary

Issues:
1. Liability to pay service tax for services received from persons resident abroad before the introduction of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994.
2. Interpretation of Section 66A regarding taxable services received by an Indian recipient from a person resident abroad.

Analysis:

1. The appeals were filed by the Revenue challenging the order of the Commissioner (Appeals) vacating demands and penalties raised on the appellants for service tax. The Commissioner found that the appellants were not liable to pay service tax for services received from persons resident abroad before the introduction of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994. The Commissioner relied on a Tribunal decision in Cadbury India Ltd. Vs. CCE, where it was held that liability to pay service tax was prospective and could not be imposed for a period before the rule amendment. The Tribunal upheld the Commissioner's decision, stating that the demand for service tax on Indian companies for services received from abroad before the introduction of Section 66A was not sustainable.

2. The learned counsel for the respondents argued citing the judgment of the Hon'ble High Court of Bombay in Indian National Shipowners Association Vs. Union of India. The High Court held that taxable services received from abroad by Indian recipients could not be taxed before the enactment of Section 66A. The High Court clarified that Indian recipients were deemed to be service providers only after the enactment of Section 66A. Since the material period of the case was before the introduction of Section 66A and after the enactment of Rule 2(1)(d)(iv), the appeals filed by the Revenue to restore demands on Indian companies for tax on services received from abroad were deemed without merit. The Tribunal sustained the impugned order and rejected the appeals filed by the Revenue.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeals filed by the Revenue, emphasizing that the liability to pay service tax for services received from abroad was not applicable before the introduction of specific rules and sections, as clarified by legal precedents and judgments.