Non levy of service tax on import of services prior to 18.04.2006.

PJ/Case law/2013-14/1628

Case:- COMMISSIONER OF CENTRAL EXCISE Versus KANSAL HOSIERY EXPORTS

Citation:- 2013 (30) S.T.R. 137 (P & H)

Brief Facts:-The facts of the present case reveal that the material period involved in the instant appeal is 9-7-2004 to 18-1-2006 when the assessee had paid Rs. 74,83,295/- to Non-resident Service Providers and a show cause notice for recovery of service tax amounting to Rs. 7,20,822/- along with interest under Section 73 read with Section 75 of the Act was issued with a proposal to impose penalty under Sections 76, 77 and 78 of the Act. The case was adjudicated by the Joint Commissioner, Central Excise Commissionerate, Ludhiana and the Adjudicating Authority affirmed the aforesaid demand and also imposed penalty. The assessee-respondent filed an appeal with the Commissioner (Appeals), Chandigarh which was rejected vide order dated 3-8-2007. On further appeal to the Customs, Excise and Service Tax Appellate Tribunal the assessee-respondent succeeded as it placed reliance on the judgment rendered in the case of Indian National Ship Owners Association, against which SLP has been dismissed, holding that the party was not liable to pay service tax on the service provided to them by the Non-resident prior to insertion of Section 66A in the Act i.e. 18-4- 2006. The view of the Division Bench of this Court in the case of Bhandari Hosiery Exports Ltd. (supra) and that of the Bombay High Court in Indian National Shipowners Association's case (supra) put the matter beyond any doubt.

Reasoning of Judgment:-After hearing the Respondent at a considerable length and find that there is nothing in Section 66A or Section 2(1)(d)(iv) which may lead to a conclusion that earlier to 18-4-2006, the Legislature intended imposition of tax on the services received by a recipient in India from outside India. The matter was considered in some detail by a Division Bench of Bombay High Court in the case of Indian National Shipowners Association v. Union of India, 2009 (13) S.T.R. 235 (Bom.). Following the judgment of Hon'ble the Supreme Court rendered in the case of Laglni Udyog Bharati v. Union of India, 2006 (2) S.T.R. 276 (S.C.), the Division Bench of Bombay High Court held that the Finance Act, 1994 was for the first time amended on 18-4-2006 whereby the revenue acquired legal authority to levy service tax on the recipient of taxable service from a person who is resident in India or has business in India. Accordingly, such a person becomes liable to payment of service tax when he received service outside India from a person who is non-resident or is from outside India after 18-4-2006. Earlier to the enforcement of Section 66A there was no authority vested by law in the revenue to levy service tax on a person who is resident in India but who receive services from a person resident outside India. Till the time Section 66A was enacted only the person who rendered the service was liable to pay tax and not the recipient of the service. Accordingly, the revenue did not have any authority to levy service tax on the assessee. The aforesaid view of the Bombay High Court has been followed and applied by a Division Bench of Delhi High Court in the case of Unitech Ltd. v. Commissioner of Service Tax, Delhi, 2009 (15) S.T.R. 385 (Del.). We are in respectful agreement with the aforesaid view expressed by the Bombay and Delhi High Court. Accordingly the appeal of the revenue is without any merit and does not warrant admission. Accordingly, the appeal is dismissed.

Decision:-Appeal Dismissed.

Comment:-The crux of this case is that any service received by the assessee by non-resident, from outside India is not leviable to service tax prior to insertion of Section 66A of the Act as the revenue did not have authority to levy and collect service tax on the recipient of services under section 66A prior to 18.04.2006.

Comments

PJ/Case law/2013-14/1628

Post a Comment

Query