Service Tax: Tax on commission paid to service provider in foreign country: Demand: The issue involved in this case is whether the respondents are liable to pay Service Tax as recipient of services during the period 26.10.2004 to 26.10.2005 for having paid the amount to a person situated out of India for the services rendered to them.(Para 3). The issue involved in this case is directly addressed by the judgment of the Bombay High Court in the case of Indian National Shipowners Association (supra). In view of this, there is no reasons for interfering with the order of the learned Commissioner (A). Appeals filed by the Revenue are rejected.(Para 8).

Service Tax:Technical consultancy service: Demand: The period of dispute in this case is from August, 2002 to March, 2004. There is no dispute about the fact that the service received by the appellant from the Foreign Service provider is a taxable service. The point of dispute is as to whether during this period, the appellant as recipient of this service were liable for payment of service tax. In this case, the dispute is for the period from 16.8.2002 when proviso to Rule 6(1) of Service Tax Rules had been deleted and hence judgement of the Apex Court in Kerala State Electricity Board (supra) which is with regard to proviso to rule 6(1) as the same existed prior to 16.8.2002 would not be applicable. As per the settled legal position on the issue, the impugned order is set aside and the appeal is allowed.(Para 5) 

Taxability: When the services have been rendered and consumed abroad not taxable Stay granted.

Import of service: Taxability from 18.4.2006.

Service Tax: Online information and database access or retrieval service: Demand: In the present case, the services were received inside the India from the person having his office in India. Section 66-A having been inserted in the Finance Act with effect from 18.4.2006 clearly laying down that recipient of services in India from outside India shall be liable to pay tax, cannot be made applicable retrospectively. There are no merits in the Revenue's contention. Accordingly, the appeal is rejected. Stay petition also get disposed off.(Para 6).

Reverse Charge mechanism: From 19.4.2006 it is not material whether foreign service provider has any place of business in India, it is service receiver who has to pay service tax: Arguable case: Partial stay granted.

Service Tax: Tax on commission paid to foreign based Commission Agents to procure export orders: It is established that as recipient, the respondents were not liable to pay Service Tax for the period prior to 18.4.2006, on which date Section 66A was inserted to the Finance Act, 1994. Appeal of the department is devoid of merits and the same is rejected.(Para 5). 

Service Tax: Consulting Engineers Service: Service Received from abroad: Section 66A: When specific charging provisions came to statute book later which was not embedded to Section 68(2) of Finance Act, 1994 following the Apex Court’s Judgement in the case of Martin Lottery reported in STO 2009 SC 857, the appeal of the appellant is allowed. (para 3)

Service Tax - Tax on recipient of service from abroad - Only with effect from 18.04.2006 - Indian National Shipowners Association followed: the present writ petitions are disposed of holding that the respondents are not entitled to levy service tax on the petitioners upto 17.4.2006, in respect of the services availed by them, as it is clear that Section 66A had been inserted in the Finance Act, 1994, by way of an amendment, by the Finance Act, 2006, only with effect from 18.4.2006, enabling the authorities concerned to levy service tax on the recipients of the taxable service. (Para 5).

Service Tax: Maintainability of writ petition when alternative remedy available: Petitioner has not chosen to give any reply to the impugned show cause notice, instead rushed to this Court with this writ petition. When the petitioner has got alternative remedy, which is efficacious, the writ petition cannot be entertained at all. The petitioner can very well submit his explanation and if any adverse order is passed, he can very well work out his remedy in the manner known to law. In respect of the question as to whether service tax is leviable, it is for the respondent to consider as to how and why the service rendered outside, but received in India is also liable for tax.(Para 6). 

Service Tax: Validity of the statute: It is first time when the Act was amended and Section 66A was inserted by Finance Act, 2006 w.e.f. 18-4-2006, 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 business in India becomes liable to be levied service tax when he 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 case, the Indian recipient of the taxable services is deemed to be a service provider. Before enactment of Section 66A, there was no such provision in the Act and therefore, the respondents had no authority to levy service tax on the members of the petitioners-association.(Para 9). Therefore, as per the judgment of Bombay High Court service tax cannot be levied prior to 17-4-2006 and the charge was created only after the introduction to Section 66A of the Finance Act.(Para 10) Writ petitions are allowed. 

Service Tax: Tax liability on the amount paid to persons situated outside India for rendering the services of Market Research and Promotion of the products in foreign countries prior to 18/04/2006: Taxable event: The judgment of the Hon'ble High Court of Bombay in the case of Indian National Shipowners Association(supra) and the judgments as cited by the Id. Consultant in the case of CCE, Ludhiana Vs. Bhandari Hosiery Exports Ltd., CST, Bangalore Vs. SKF India Ltd. and in CST, Bangalore Vs. Araco Corporation, clearly settle the law, that provisions of Rule 2(1)(d)(iv) of the Service Tax Rules cannot be pressed into service for recovery / demand of service tax prior to 18/4/2006 i.e. when the provisions of Rule 66A came into statute.(Para 6). The issue is now squarely covered in favour of the respondents by the dismissal of the Revenue's SLP filed before the Hon'ble Supreme Court against the judgment of Hon'ble High Court of Bombay in the case of Indian National Shipowners Association as reported at 2010(17) S.T.R. 157 (SC). Appeal filed by the Revenue is dismissed. Cross-objection is also disposed off.(Para 7). 

Service Tax: vires of Section 66A of the Finance Act, 1994: Import of services whether taxable: Government of India, Ministry of Finance, Department of Revenue, by a Circular dated 30-6-2010 in F.No. 275/7/2010 CX. 8A, directed the authorities to abide the terms of the Circular for all future assessment. In paragraph Nos. 3 to 5 of the Circular, it was directed as follows :-

“3. In view of the above the accepted position is that,

(i) in case of taxable service provided by a non-resident, not having office/establishment in India, and received in India, the service tax liability arises w.e.f. 1-1-2005 on reverse charge basis on the recipient of service in India. Therefore, the overall facts and circumstances of each case needs to be taken into account to determine whether service is received in India or otherwise.

(ii) in case of taxable service received outside India by a person, who is resident in India or has place of business/business establishment in India, the service tax liability arises w.e.f. 18-4-2006, as is in the case of INSA, where services were received outside India for use in the ships and vessels located outside India.

5. Accordingly, it may be critically examined in pending disputes as to whether the service was received in India or-outside India and appropriate action may please be taken for resolution of such disputes.”------(Para 3).

In the light of the Division Bench judgment of the Bombay High Court reported in 2009 (13) S.T.R. 235 (Bom.) (cited supra) both the Writ Petitions are liable to be rejected. However, the liability of the petitioners has to be worked out only from 18-4-2006.(Para 4). Writ petitions dismissed.
 

Service Tax: Valuation of taxable service: Rule 7 (1) of the Service tax (Determination of Value) Rules, 2006: Rule 7, is specifically applicable for reverse mechanism under Section 66A. It is not in dispute that the amount of service tax demanded is towards the amount paid by the applicant on the traveling and conveyance expenses incurred in connection with the services of engineers for technical assistance and training the personnel. The provisions of rule 7 will apply to this case. The appellant has already discharged the service tax on technical fee charged by the foreign company. In view of this, the application for waiver of pre-deposit of the amounts herein above is allowed and recovery thereof stayed till the disposal of the appeal.(Para 6). 

Service Tax: Business Auxiliary Services' as a recipient of taxable services: Taxable event: In this case, for the period 7/2003 to 03/2006, the appellant had paid an amount of 12% sales value as commission to the people who were non-resident in India or were residing outside India, as an amount payable to them for rendering the services on behalf of the appellants therefore,the judgment of the Hon'ble High Court of Mumbai in the case of India National Ship Owners Association (supra) squarely covers the issue in favour of the assessee, as the provisions of Section 66A of the Finance Act, 1994, provides for discharge of service tax liability by recipient of services, in reverse charge mechanism will be applicable with effect from 18.4.2006. Hon'ble High Court had in judgment considered the Notification No. 36/2004 and had also considered the provisions of Rule 2 (1) (d) (iv) of Service Tax Rules, 1994.(Para 6,7). 

Issue of show cause notice: Once an adjudication order is passed on the subject matter, the issuance of another show-cause notice by the same authority for enhancement of penalty does not arise, and Revenue should have taken recourse to other options available in the statute.(Para 8). Appeals are disposed off.(Para 9).
 

Consulting Engineer Service: Service received from abroad: Recipient of consulting engineer service from outside India is not liable to pay service tax prior to 01.01.2005.