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2024 (1) TMI 822 - HC - Central ExciseRecovery of amount of service tax before issuing notification under Section 68(2) of the Finance Act, 1994 - Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 - HELD THAT - In the present case, the respondents have rejected the refund claim of the appellant of Rs. 4,69,561/- in respect of service rendered from a non-resident provider for the period prior to 31.12.2004. The Bombay High Court in the case of Indian National Shipowners Association 2008 (12) TMI 41 - BOMBAY HIGH COURT has held that Respondents are restrained from levying service tax from the members of the Petitioners association for the period from 1-3-2002 till 17-42006, in relation to the services received by the vessels and ships of the members of the Petitioners association outside India, from persons who are non-residents of India and are from outside India. In view of the settled position of law the said action of the respondents is illegal and in such circumstances, the impugned order dated 17.08.2007 passed by the Customs Excise Service Tax Appellant Tribunal, New Delhi is hereby set aside and consequentially the orders dated 17.06.2005 passed by the Deputy Commissioner Central, Excise and Division, Bhilwara and 20.10.2005 passed by the Commissioner (Appeal II) Customs Central Excise, Jaipur are also set aside. The respondents are directed to refund the payment of Rs. 4,69,561/- to the appellant on the applicable interest in accordance with law within a period of six months from the date of production of certified copy of this order - Appeal allowed.
Issues involved:
The appeal against the rejection of a refund claim of Rs. 4,69,561 in relation to services provided by a non-resident service provider before 31.12.2004. Judgment Details: Issue 1 - Recovery of Service Tax: The main question was whether the respondent could recover service tax before issuing a notification under Section 68(2) of the Finance Act, 1994. The appellant contested the rejection of the refund claim based on the provision of Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, which allows for the refund of tax paid for services from a non-resident service provider. The appellant cited a Bombay High Court decision and subsequent Supreme Court dismissal of an SLP, supporting the argument that service tax cannot be levied for services received from a non-resident service provider before 18.04.2006. The Gujarat and Madras High Courts also followed the Bombay High Court's decision, and the respondent did not dispute this legal position. Issue 2 - Legal Validity of Tax Levy: The Bombay High Court's judgment in the Indian National Shipowners Association case was crucial. It held that the provisions of Rule 2(1)(d)(iv) were invalid as they conflicted with the Act, making the recipient of the service liable for tax instead of the service provider. The judgment emphasized that the Act only makes the service provider liable for tax, not the recipient. It also discussed the legal authority to levy service tax on recipients of taxable services, highlighting the significance of Section 66A inserted by the Finance Act, 2006. The judgment concluded that until the enactment of Section 66A, the respondents had no authority to levy service tax on Indian residents receiving services from abroad. Therefore, the petition succeeded, restraining the respondents from levying service tax on the appellant for services received from non-residents outside India. Final Decision: The High Court agreed with the Bombay High Court's judgment and set aside the rejection of the refund claim. The impugned orders were also set aside, and the respondents were directed to refund the payment to the appellant with applicable interest within six months. Consequently, the appeal was allowed in favor of the appellant.
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