2009 (8) TMI 45 - AT - Service Tax

Business Auxiliary Service Bonafide belief Export of Servcies Circular 36/4/01 dated 8/10/2001 Held that - the circular which is squarely to the effect that the service provided outside beyond the territorial waters of India are not liable to Service Tax was valid and in force until it was withdrawn on 10.05.07. It cannot be accepted that the assessees could not have had a bonafide belief on the basis of the above. Penalties imposed u/s 76 and 78 deleted.

Summary

In the appellate tribunal CESTAT, Chennai, the case involved a service tax demand of Rs. 1,22,56,765, interest, and penalties imposed on the assessees for receiving Business Auxiliary Services from a foreign provider. The tribunal considered the liability of the assessees to pay tax from 18.04.06 onwards based on legal precedents. The demand for the period prior to 18.04.06 was set aside, and the tax liability was to be re-determined. While the assessees did not dispute the penalty under Section 77, they sought relief under Section 80, citing a circular that stated services provided outside Indian territorial waters were not taxable. The tribunal accepted the assessees' plea, setting aside penalties imposed under Sections 76 and 78 of the Finance Act. The appeal was partly allowed with consequential relief for the appellants.