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TMI Blog2008 (6) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ice in India - to pay service tax. In Aditya Cement vs. CCE, 2007 (79) RLT 581 (CESTAT-Del.)=2007 (7) STR 153, a Single Member Bench of the Tribunal held that the service receiver was not liable to pay service tax for the services received prior to 1.1.2005. The decision was followed by a Division Bench in Ispat Industries Ltd. vs. CCE 2007 (80) RLT 357 (CESTAT-Mum.)2007 (8) STR 282. Doubting the correctness of the said decisions this appeal was referred to Larger Bench for an authoritative pronouncement on the issue. 2. The scheme of the law relating to service tax so far as relevant may briefly be noticed. The provisions are contained in Chapter V of the Finance Act, 1994 as amended from time to time. As the dispute herein pertains to the period from January, 2004 to July, 2005, the provisions as they stood during the relevant period, only need be noticed. Section 65 which is the definition clause, inter alia, defines 'taxable service'. The taxable service with which we are concerned in this appeal is 'consulting engineer' service figuring at sub-clause (g) of clause (48) of section 65 at the relevant time. Section 66 is the charging provision. At the relevant time it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of 'notified' taxable services, any other person - as may be prescribed - becomes liable to pay the tax. 'Prescribed' means prescribed by rules vide clause (30) of section 65. The prescription is contained in clause (d) of sub-rule (1) of rule 2 of the Service Tax Rules, which defines 'person liable for paying service tax'. A new sub- clause (iv) was inserted in clause (d) by notification no. 12/2002-ST dated 1.8.2002 with effect from 16.8.2002. In view of its significance, the same may also be quoted as under: "(d) Person liable for paying service tax means, ………………………………………………………………… (iv) in relation to any taxable service provided by a person who is a non-resident or is from outside India, and does not have any office in India, the person receiving taxable service in India." 4. The issue which arises for consideration is whether by virtue of notification no. 12/2002 dated 1.8.2002 inserting sub-clause (iv) in rule 2(1)(d) of the Rules, the recipient of the taxable service provided by a non resident or from outside India, who does not have any office in India, became the "person liable to pay service tax" in terms of section 68 (2) of the Act. if so, they became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llection of tax can be extended to include the person liable to pay the tax. The person liable to pay the tax is an integral component of any tax - as a concept, distinct from the mechanism for its collection and recovery. Reference to section 68 in section 94(2)(a) simply means that the Central Government is required to make rules for collection and recovery of service tax under Section 68, read with section 66 which is the charging section. As seen above, section 68 (2) envisages specifying the 'services' in relation to which a person other than the service provider is to be made liable to pay service tax; it also envisages specifying the 'person' - other than the service provider - to be made liable to pay service tax. While the former is to be done by way of notification, the latter can be done by making rules. It is well known that where the law provides the manner for doing something, it should be done in that manner or not at all. It is relevant to mention here that while notification no. 12/2002 was issued amending the Service Tax Rules in exercise of rule making power under section 94 of the Act, notification no. 36/2004 was issued in exercise of powers under section 68(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of such service tax the person liable to pay service tax under notification no. 12/ 2002 was not sufficient. Notification no. 12/2002, as seen above, inserted another sub-clause in clause (d) of Rule 2 which is the definition clause of the Service Tax Rules. The definition clause cannot be read as a substantive provision creating liability muchless in a tax statute. The notification/amendment simply enlarged the definition of 'person liable to pay service tax' in relation to "any taxable service provided by a person who is a non-resident or from outside India, does not have any office in India" making the recipient of such service liable to pay service tax. It did not specify, and possibly could not have, the particular service or services in relation to which recipient would be liable to pay service tax. This was done by notification no. 36/2002 which was issued under Section 68(2) of the Act specifying the taxable service "for the purposes of" the said sub-section i.e. sub-section (2) of section 68. 10. As seen above, four services (as seen above) were (initially specified in Part A of notification no. 36/2004 dated 31.12.2004. The service specified in Part B was omnibus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the service (s) in relation to which liability is to be so fastened, has also to be identified and specified. It is relevant to mention that services had been specified in the erstwhile sub section (1A) of Section 68, itself,-corresponding to present sub-section (2) in which it has now been left to the Central Government to do so by a notification. 13. On behalf of the appellant attention was drawn to the fact that whenever any addition was made in the list of taxable service for the purposes of Section 68 (2), corresponding amendment was made in the Rules i.e. Rule 2 (1) (d) of the Service Tax Rules. For example, the service 'in relation to business auxiliary service of distribution of mutual fund by mutual fund distributor or an agent' and 'in relation to sponsorship service provided to any body corporate or firm located in India' were specified by Notification No. 5/2005-ST dated 1.3.2005 and Notification No. 16/2006 dated 25.4.2006, respectively. Corresponding amendments were made inserting clauses (vi) and (vii) in Rule 2 (1) (d) of the Service Tax Rules with effect from 1.4.2005 and 1.5.2006 which reflect the understanding of the Central Government that making amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch Rules 2 (1) (d), (xii) and (xvii) of the Service Tax Rules struck down were displaced and removed. The Court observed that a legislature is competent to remove infirmities retrospectively and make any imposition of tax declared invalid, valid. The following observations may be noticed:- "21. As we read the decision in Laghu Udyog Bharti, the basis was the patent conflict between Sections 65, 66, 68 (1) and 71 of the Finance Act, 1994 as amended in 1997 on the one hand and Rules 2 (1) (d) (xii) and (xvii) of the Service Tax Rules, 1994 on the other. Each of these sections of the Finance Act, 1994 as amended in 1997 proceeded on the basis that the tax was imposable on the person providing the service. All other sections regarding the liability to furnish returns, assessments, penalties etc. flowed from that. It was because unamended Section 66 spoke of the liability to pay tax in respect of services 'which are provided to any person by the person responsible for collecting the service tax' and Section 65 (5) defined 'assessee' as meaning 'a person responsible for collecting the service tax', that this Court held that Clauses (xii) and (xvii) of Rule 2 (1) (d) of the Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions to support his contention (so did the learned Advocate for the appellant); in view of the clear legal position, as it appears to us and stated hereinabove, we have not considered it necessary to deal with them. 17. The upshot of the above discussion is that the taxable service provided by a non-resident or from outside India, who does not have any office in India, having been specified as 'taxable service' with effect from 1.1.2005, under Notification No. 36/2004, recipient of such service could not be held liable for paying service tax prior to 1.1.2005 notwithstanding the amendment in Rule 2 (1) (d) of the Service Tax Rules under Notification No. 12/2002. 18. We thus concur in the view expressed in the cases of Aditya Cement and Ispat Industries, supra. The issue is thus answered in favour of the assessee and it is held that as a recipient of the 'consulting engineer' service from outside India, the appellant was not liable to pay service tax prior to1.1.2005. 19. The reference having been answered, the appeal may be listed before the Division Bench for final disposal according to law. (Pronounced in open Court on 27th day of June, 2008.) - - TaxTMI - T ..... 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