2022 (11) TMI 48 - SC - Service Tax

Levy of service tax - service received by the respondent/Assessee received in India, provided by nonresident/ person located outside India - reverse charge mechanism - HELD THAT - In the present case, the taxable service received by the respondent/Assessee received in India, when provided by nonresident/ person located outside India was for the period between November, 1999 and March, 2002, i.e., prior to 18.04.2006, the Tribunal has rightly set aside the the levy of service tax on the aforesaid. Once there is no service tax liability by the respondent/Assessee for the services received during the period between November, 1999 and March, 2022, there is no question of levy of any penalty. Therefore, the Tribunal has rightly held that the Assessee is not liable to pay any penalty, as sought to be levied by the Department. Appeal dismissed.

Summary

Issues:
1. Service tax liability and penalty on service tax liability for the same Assessee and period.

Analysis:
The Supreme Court delivered a judgment on three appeals concerning the service tax liability and penalty on such liability for the same Assessee and period. The first appeal (Civil Appeal No. 4814 of 2009) challenged the Tribunal's decision to set aside the levy of service tax on the Assessee. The second and third appeals (Civil Appeal Nos. 3680-3681 of 2012) were filed by the Revenue against the Tribunal's refusal to impose penalties under Sections 75-A and 78 of the Finance Act, 1994. The Commissioner had not imposed the penalties, leading to the Revenue's appeals being dismissed by the Tribunal.

The main issue in the appeals revolved around the service tax liability for services provided outside India between November 1999 and March 2002. It was established that service tax on services provided by non-residents located outside India is applicable on a reverse charge basis from January 1, 2005, and specifically leviable only from April 18, 2006. The Central Board of Excise and Customs (CBEC) issued a Circular on September 26, 2011, clarifying the applicability of service tax on such services. The Circular highlighted that service tax liability for services provided by non-residents or persons located outside India to recipients in India arises only from April 18, 2006, as per the enactment of Section 66A of the Finance Act, 1994.

Considering the legal provisions and the CBEC Circular, the Tribunal rightly set aside the service tax levy on the Assessee for the period in question, i.e., before April 18, 2006. Consequently, since there was no service tax liability on the Assessee for the relevant period, the Tribunal correctly concluded that there was no basis for imposing any penalties. Therefore, the Tribunal's decisions were upheld by the Supreme Court, leading to the dismissal of all three appeals. The Assessee was deemed not liable to pay any penalty as initially sought by the Department.

In conclusion, the Supreme Court dismissed all three appeals, affirming the Tribunal's decisions regarding the service tax liability and penalties. The Assessee was relieved of the service tax liability and subsequent penalties due to the specific legal provisions and the CBEC Circular clarifying the applicability of service tax on services provided by non-residents or persons located outside India to recipients in India.