Foreign Service Provider and Indian Tax payer - since when? - Latest Bombay High Court Order in TIOL Today
In Foster Wheeler Energy Ltd case - , the Tribunal had held that Foreign Service Tax cannot be levied prior to 18.4.2006.
In the Hindustan Zinc case - , a Larger Bench of the Tribunal headed by the President held 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. 12/2004."
These columns had explained the provisions in 09.07.2007
Now the Bombay High Court has emphatically held that no tax could be collected on the services received abroad prior to 18.4.2006. The High Court held that till 18.4.2006, the Revenue had no LAW to collect the tax and as per the constitution, no tax can be collected except by authority of law.
The High Court held, "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 66-A was enacted a person liable was the one who rendered the services. In other words, it is only after enactment of Section 66-A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian residents."
Hundreds of cases on this issue are pending at various stages from Assistant Commissioner to High Court. Maybe the Board should now graciously accept this High Court judgement and issue a clarification that the foreign tax is applicable only from 18.4.2006 and close all the pending cases.
The present CBEC Chairman will go down in history for his bold step in issuing a Section 37 B order - F.No. 166/13/2006- CX.4 dated the 12th March, 2007, clarifying that abatement in respect of GTA cannot be denied to recipients of service who pay the tax and thereby he closed more than 30,000 Show Cause Notices. He had ordered that demands need not be issued even if there are CAG objections.
It is another opportunity for the dynamic Chairman to come up with another such order in respect of this foreign service so that a lot of unwanted litigation can be avoided. Of course the consultants will lose some money - but that is a small price to pay for the larger welfare of society.
See our Breaking News for the latest High Court order.