2008 (2) TMI 39 - AT - Service Tax

Appellant procures orders as an commission agent for his clients(in India) - business auxiliary services appellant, resident of India but has office in USA assessee contended that disputed period is from 8-7-04 to 31-12-04. He said that during that period the services rendered abroad were not liable to Service tax in view of the Circular 36/4/01-S.T. dated 8-10-01 - held that offshore services are liable to tax only after insertion of Sec 66A in Finance Act w.e.f 18-4-06 appeal allowed

Summary

Issues:
1. Taxability of services rendered abroad from 8-7-2004 to 31-12-2004 under "Business Auxiliary Services."
2. Applicability of Circular No. 36/4/2001-S.T. dated 8-10-2001 on the liability of Service tax.
3. Interpretation of Notification No.14/2004-S.T. dated 10-9-2004 for exemption.
4. Benefit denial based on the interpretation of services mentioned in the Notification.
5. Legal point not raised before lower authorities.
6. Reference to case laws - Foster Wheeler Energy Ltd. v. CCE & C, Vadodara and IN RE: Modern Petrofils.
7. Analysis of Circular No. 36/4/2001-S.T. dated 8-10-2001.
8. Introduction of Section 66A in the Finance Act, 1994.
9. Decision based on the legal position regarding payment of Service tax.
10. Conclusion and allowance of the appeal with consequential relief.

Analysis:
1. The appeal concerns the taxability of services provided abroad from 8-7-2004 to 31-12-2004 under "Business Auxiliary Services." The appellant, a resident of India with an office in the USA, procures orders for clients in India, claiming exemption based on Circular No. 36/4/2001-S.T. dated 8-10-2001, stating services outside Indian territorial waters are not liable to Service tax during the relevant period.

2. The appellant relied on Circular No. 36/4/2001-S.T. dated 8-10-2001, which clarifies that services provided outside Indian territorial waters are not taxable. The legal position regarding the liability of Service tax was established, emphasizing that the services abroad were not taxable during the relevant period before the introduction of Section 66A in the Finance Act, 1994.

3. The lower authorities interpreted Notification No.14/2004-S.T. dated 10-9-2004, denying the benefit to the appellant based on the services mentioned in the Notification not being considered as inputs for the clients. The appellant's claim for exemption was not upheld due to this interpretation, leading to a dispute regarding the applicability of the Notification.

4. The legal point regarding the non-liability of Service tax for services provided abroad during the relevant period was not raised before the lower authorities. However, the appellant claimed the benefit of the exemption Notification, which was denied based on the interpretation of the services provided not aligning with the Notification's criteria.

5. The judgment references case laws such as Foster Wheeler Energy Ltd. v. CCE & C, Vadodara and IN RE: Modern Petrofils to support the contention that offshore services were taxable only after the introduction of Section 66A in the Finance Act, 1994, from 18-4-2006, emphasizing the legal position during the relevant period.

6. The analysis delves into Circular No. 36/4/2001-S.T. dated 8-10-2001, which clarifies the non-taxability of services provided outside Indian territorial waters, highlighting the scope and applicability of the Circular in determining the liability of Service tax for services rendered abroad during the relevant period.

7. The judgment concludes by affirming the legal position that services provided abroad were not liable for Service tax during the relevant period, as per Circular No. 36/4/2001-S.T. dated 8-10-2001, and the absence of the provision under Section 66A in the Finance Act, 1994, until 18-4-2006. Consequently, the appeal is allowed with consequential relief based on the clear legal position established.