The
subject matter had been a controversial issue. The attempt of the
Central Govt. to subject the services rendered from abroad to Indian
service recipients, under the Reverse Charge Mechanism, resulted into bringing
about rather inconsistent amendments to the Act, the rules and issuance
of Notifications. All these created confusions regarding the effective
date from which the liability would devolve upon the Indian recipients.
A
school of thought advocated that the tax was applicable from 1.8.2002,
when the Government amended the ST Rules to make the service recipient liable
to pay the tax, while some others propogated the view that it was applicable
from 1.1.2005 when the Notification No. 36/2004 was issued, another school of
thought opined that it is only from 16.06.2005, when the explanation added to
Section 65 became effective while rest of the experts advocated that the tax
can be extracted from service recipients only from 18.04.2006 when the new
Section 66A came into effect.
Finally,
the Central Board of Excise & Customs , now concedes that in view of the
judgements of the Supreme Court, the service tax liability on any taxable
service provided by a non-resident or a person located outside India, to a
recipient in India, would arise with effect from
18.04.2006, i.e., the date of enactment of section 66A of the Finance
Act, 1994.
This
would come as a relief to all our Units who are facing litigations on this
issue at various forums.
The said
circular is reproduced below for your reference.
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
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F. No.
276/8/2009-CX8A
Government of India
Ministry of
Finance
Department of
Revenue
(Central Board
of Excise & Customs)
New Delhi
Dated : September 26, 2011
Sub: Applicability
of service tax on taxable services provided by a non-resident or a person
located outside India to a recipient in India-reg.
Kind attention is invited to instruction F No.
275/7/2010-CX8A, dated 30.6.2010, wherein the Board had communicated its
view that services tax on a taxable service received in India, when
provided by a non-resident/person located outside India, would be
applicable on reverse charge basis with effect from 1.1.2005, and that
the ratio of judgement in M/s Indian National Shipowners Association
(INSA) case – (2008-TIOL-633-HC-MUM-ST) would not apply to such cases.
Further, direction was issued to field formations to defend the levy of
service tax on such services for the period on or after 1.1.2005, as post
INSA judgment, it has been held by the High Courts/Tribunal in a large
number of cases, applying ratio thereof, that service tax on such
services is leviable only w.e.f. 18.4.2006. However, the appeals filed by
the department before the Hon'ble Supreme Court, for defending the levy
of service tax on such services w.e.f. 1.1.2005, have been dismissed
recently (subsequent to the issuance of said instruction dated 30.6.2010)
in the following cases.
(i)
SLP (C ) No . 29539 of 2010 in CCE Vs Bhandari Hosiery Exports Ltd
(ii)
SLP (C )No . 18160 of 2010 in CST Vs Unitech Ltd
(iii)
SLP (C) No. 34208/09 of 2010 in UOI Vs S R Batliboi & Co.
(iv)
SLP (C)No. 328/332 of 2011 in UOI Vs Ernst & Young
(v)
SLP (C) No. 25687-25688/2011 in CCE Vs Needle Industries
(vi)
SLP (C) No. 25689-25690/2011 in UOI Vs SKM Engg Products
Further,
Review Petition No. 1686 of 2011 filed in the case of Bhandari Hosiery
has also been dismissed by the Hon'ble Supreme Court vide order dated
18/8/2011.
2. In view of the aforementioned judgments of the Hon'ble
Supreme Court, the service tax liability on any taxable service provided
by a non resident or a person located outside India, to a recipient in
India, would arise w.e.f. 18.4.2006, i.e., the date of enactment of
section 66A of the Finance Act, 1994. The Board has accepted
this position. Accordingly, the instruction F No. 275/7/2010-CX8A, dated
30.6.2010 stands rescinded.
3. Appropriate action may please be taken
accordingly in the pending disputes.
Yours faithfully,
(G. D. Lohani)
Director (Legal)
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