Appeal No. ST/605 of 2010
Application No. ST/S/1712 of 2010

Arising out of OIA NO. 278/2010(STC)/MM/Commr(A)/Ahd Dated: 31.08.2010
Passed by Commr. (Appeals) C. Excise & Cus Ahmedabad

Date of Decision: 15.04.2011




Appellant Rep by: Shri Rajendra Nagar, SDR
Respondent Rep by: Shri N K Oza, Adv.

CORAM: Dr P Babu, Member (T)

Service Tax – Liability to pay service tax on the services received from outside India – Whether applicable date is 01.01.2005 or 18.4.2006 – Undoubtedly the applicable date is only 18.4.2006 in view of the decision in case of Indian National Ship owners Association – Revenue appeal has no merit.

Appeal dismissed.

ORDER No.A/1276/ /WZB/AHD/2011

Per: P Babu:

After rejecting the stay petition filed by the Revenue in the absence of any plausible grounds, I take up the appeal itself for decision. The issue involved is short and covered by the precedent decisions. It is seen that the entire demand of service tax of Rs. 3,503/- also stands paid by the respondents M/s. Bosch Rexorth (India) Limited on 12.10.2007.

2. The issue in brief is that M/s. Bosch Rexorth (India) Limited received technical services from a foreign service provider during the year 2004-05 but did not pay service tax due thereon. Service Tax Rules, 1994 were amended with effect from 16.5.2005 vide Notification No. 23/2005-ST dated 07.6.2005 and consequently, Section 65 (105) of the Finance Act, 1994 so as to levy the service tax on import of services. On adjudication, the original adjudicating authority dropped the demand mainly on the ground that service charges pertain to the year 2004-05. Commissioner (Appeal) has upheld this order. However, the Revenue is of the opinion that the order in appeal is not legal and proper and hence filed this appeal. The main contention of the Revenue is that the case law referred to by the Commissioner (Appeal) i.e. the decision by the Hon'ble High Court of Bombay in the case of Indian National Ship owners Association vs. UOI 2009 (13) STR 235 (Bom) = ( 2008-IST-23-HC-MUM-ST ) is not appropriate. The Revenue has taken a view that in the present case, the services have been received in India and therefore, effective date of levy of service tax is from 01.01.2005. For better appreciation of the legal position I quote the relevant portion of the order of Hon'ble High Court of Bombay in the above referred case :-

20. .. .. 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 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 cases, 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.

3. Without leaving any scope for doubt, the Hon'ble High Courts decision makes it clear that reverse charge mechanism operating under Rule 2(1) (d) (iv) of the Service Tax Rules, 1994, is effective only from 18.04.2006. Therefore the demand of service tax for the period prior to 18.4.2006 under reverse charge or tax shift mechanism is not applicable.

4. In view of the above, I do not find any sustainable point in the appeal filed by the Revenue. There is no infirmity in the order of Commissioner (Appeal). The appeal filed by the Revenue is rejected. Stay petition also gets disposed of.

(Pronounced in the Court)

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