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TMI Blog2019 (6) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Act which include only three types of services namely, any service provided to an investor by a stock-broker, to a subscriber by telegraph authority and to a policy holder by a insurer carrying on general insurance business. Section 68 of the Act requires every person providing the taxable service to collect service tax at the specified rate. Section 69 of the Act provides that registration of a person responsible for collecting service tax. Sub-section 2 of Section 5 of the Act indicates that it was the provider of the service, who is responsible for collecting the tax and obliged to get itself registered. Thus, on a conspectus of Section 65, 66, 68 and 69 of the Act make it abundantly clear that no tax for rendering service can be collected from the recipient of service. The rule empowering the authorities to collect service tax from the recipient of services cannot be held to be valid and in conformity with law - Rule 2 (1)(d)(iv) of Service Tax Rules, 1994 is ultra vires the provisions of the Act and the Constitution and is accordingly declared bad in law. Appeal allowed - decided in favor of appellant. - W.P.(C) No. 4423 of 2005 - - - Dated:- 30-1-2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G.S.R. (E)- In exercise of the powers conferred by subsection (1) read with sub-section (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, except as respects things done or omitted to be done before such amendment, namely:- 1. (1) These rules may be called the Service Tax Amendment Rules, 2002. (2) They shall come into force on the 16th day of August 2002. 2. In the Service Tax Rules, 1994, (hereinafter referred to as the said rules) in rule 2, in sub-rule (1), in clause (d). (a) in sub-clause (iii), after the words general insurance business , the words or the life insurance business, as the case may be, shall be inserted; (b) after sub-clause (iii), the following clause shall be inserted, namely;- (iv) in relation to any taxable service provided by a person who is a non-resident or is from outside India, does not have any office in India, the person receiving taxable service in India. 3. In rule 4 of the said rules, in sub-rule (1), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 418. The relevant paragraphs of the said judgment which are placed reliance by learned counsel for the petitioner-Company is reproduced hereunder: 7. A perusal of these provisions relating to the machinery of the levy and collection of service tax clearly shows that any action which is required to be taken is qua the assessee, namely, the person responsible for collecting the service tax which includes his agents. 8. Section 66, which is a charging section provides that the charge of tax at the rate of 5% is on the value of the taxable services which are provided to any person by the persons responsible for collecting the service tax. Insofar as the clearing agents and the transporters are concerned, Section 66 has to be read with Section 65(41) (d), (j) and (m), according to which the taxable service is what, in the case of clearing and forwarding agents is rendered to his client and in the case of goods transporter is rendered to its customer. The person responsible for collecting the service tax , referred to in Section 66, has to be read with Section 65(28) which defines this expression to mean the perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with regard to services provided by the clearing and forwarding agents and the goods transport operator a person responsible is said to be the client or the customer of the clearing and forwarding agents and the goods transporter. In relation to the services provided by others and referred to in sub-rule (i) to (xi) and (xiii) to (xvi) of Rule 2(d), the definition of the person responsible is in consonance with the definition of that expression occurring in Section 65 of the Act. However, with regard to the service rendered by clearing and forwarding agents and the goods transport operator the definitions contained in Rule 2(d)(xii) and (xvii), which seek to make the customers or the clients as the assessee, are clearly in conflict with Sections 65 and 66 of the Act. 11. Section 68(1-A) cannot, to our mind, regard a customer or a client of the clearing and forwarding agent or of the goods transport operator being treated as an assessee who will become liable to file a return and be subjected to the levy of service tax and if he does not file the return, would render himself to penalty and other proceedings. In this connection we may refer to Sections 70 and 71 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) The Central Excise Officer, after considering such accounts documents or other evidence, if any, as he has obtained under sub-section (1) and after taking into account any relevant material which he has gathered, shall, by an order in writing, assess the value of taxable service and the amount of service tax payable on the basis of such assessment. 12. These sections clearly show that the return which has to be filed pertains to the payment which are received by the person rendering the service in respect of the value of the taxable services. Surely, this is a type of information which cannot, under any circumstances, be supplied by the customer. Moreover the operative part of sub-section (1) of Section 70 clearly stipulates that it is a person responsible for collecting the service tax who is to furnish the return. By rules which are framed, the person who is receiving the services cannot be made responsible for filing the return and paying the tax. Such a position is certainly not contemplated by the Act. 6. He further relied upon the decision of the Bombay High Court in Indian National Shipowners Association and another v. Union of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. So far as reliance placed on the notification dated December 31, 2004 for justifying levy of service tax from the members of the petitioners-association is concerned, that notification has been issued under sub-section (2) of Section 68 of the Act. Sub-section (2) of Section 68 reads as under: 68(2) Notwithstanding anything contained in subsection (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in Section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. 23. The above provision authorises the Central Government to notify the taxable service, in relation to which the rules can be framed, in relation to such service. By the notification dated December 31, 2004, any taxable service provided by a person who is a non-resident or is from outside India is notified. If rule 2(1)(d)(iv) is taken to be rule framed pursuant to this provision, then a person who receives t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Supreme Court to be invalid. The law laid down by the Supreme Court in its judgment in Laghu Udyog (supra) is squarely applicable to rule 2(1)(d)(iv), which is relied on in this case. It appears that it is first time when the Act was amended and Section 66A was inserted by the Finance Act, 2006 with effect from April 18, 2006, the respondents got legal authority to levy service tax on the recipients of the taxable service. Now, because of the enactment of section 66A, a person who is resident in India or a business in India becomes liable to be levied service tax when he/it receives service outside India from a person who is non-resident or is from outside India. Before enactment of section 66A it is apparent that there was no authority vested by law in the respondents to levy service tax on a person who is resident in India, but who receives services outside India. In that case till section 66A was enacted a person liable was the one who rendered the services. In other words, it is only after enactment of section 66A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents. In such cases, the Indian recipient of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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