2009 (7) TMI 627 - HC - Service Tax

Payment of service tax- Appeals to Tribunal rejected assessee s application seeking waiver of pre-deposit of amount of service tax and interest payable thereon. Whether in view of judgment of Bombay High Court rendered in case of Indian National Shipowners Association v. Union of India 2009 -TMI - 32013 - HIGH COURT OF BOMBAY, lying down law that recipient of service is not liable for paying service tax, impugned order of Tribunal to extent it had not granted waiver of pre-deposit of amount of service tax with interest payable thereon, was liable to be set aside. Held-yes.

Summary

Issues: Misdirection in law by the Tribunal regarding waiver of service tax with interest.

In this judgment by the Bombay High Court, the issue revolves around the misdirection in law by the Tribunal concerning the waiver of service tax with interest. The Court refers to a previous judgment in the Indian National Shipowners Association case, highlighting that the Tribunal erred in not granting a waiver in the demand of service tax with interest. The Court emphasizes that the recipient of the service cannot be held liable for paying service tax based on specific provisions of the law. The judgment clarifies that the provisions of Rule 2(1)(d)(iv) are invalid and that the law laid down by the Court is binding on all Tribunals and Authorities within its jurisdiction.

The Court specifically points out that the Tribunal misdirected itself in law by not granting a waiver in the demand of service tax with interest. It highlights the provisions of Rule 2(1)(d)(iv) and the interpretation of the law in relation to the liability for paying service tax. The judgment underscores that the recipient of the service cannot be made liable for the service tax, especially in cases where the services are received outside India from non-residents. The Court's decision in the Indian National Shipowners Association case is cited to support the argument that the Tribunal's decision was legally flawed.

Furthermore, the judgment quotes relevant portions from the previous case to reinforce the argument that the provisions of Rule 2(1)(d)(iv) are contrary to the Act and cannot be used to levy service tax on the members of the petitioners-association. The Court's analysis delves into the legislative framework and the interpretation of rules governing the taxation of services provided outside India. By referencing specific paragraphs from the judgment, the Court establishes a legal basis for its decision to set aside the impugned order and allow the appeal to proceed without any pre-deposit.

In conclusion, the Bombay High Court's judgment clarifies the legal position regarding the liability for paying service tax and the misdirection by the Tribunal in not granting a waiver of the amount of service tax with interest. The Court's detailed analysis of the relevant provisions and previous case law sets a precedent for future cases within its jurisdiction. The ruling emphasizes the importance of adhering to the law and ensuring that the correct legal principles are applied in matters concerning service tax liability.