Foreign Service Provider and Indian Tax payer – since when? – Litigation Continues in spite of Government's Review Petition in Hindustan Zinc being dismissed
STRANGE are the ways of the Government in multiplying litigation.
For a complete analysis of the issue, please see 09.07.2007.
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.”
The Department had challenged this in the Supreme Court and the Supreme Court had dismissed the Government's appeal - 2009-TIOL-87-SC-ST.
This, many in the Government, take as a reason to state that the Supreme Court had confirmed that Service Tax on import of services is payable from 1.1.2005 and not 18.4.2006 as held by the Bombay High Court in Indian National Shipowners Association –
The Supreme Court had not held that the tax is payable from 1.1.2005, but only dismissed the Revenue appeal against the CESTAT order holding that it was not payable before 1.1.2005. And there is a lot of difference in the two concepts.
Anyway not satisfied with the dismissal of its appeal by the Supreme Court, the Government filed a review petition in the Supreme Court in the Hindustan Zinc case. The Supreme Court found no merit in the prayer for Review and dismissed the Review Petition. -
The Bombay High Court judgement in Indian National Shipowners Association – , has been extensively followed by various benches of the Tribunal in the following cases.
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And when a Tribunal Bench did not follow this, the Bombay High Court in A C NEALSEN ORG-MARG PVT LTD & ANR - observed, “Once this Court lays down the law that the recipient of the service is not liable for paying service tax, that law is binding on all Tribunals and Authorities functioning within the jurisdiction of this Court.”
Even the Delhi High Court followed the Bombay High Court decision while dealing with the case of Unitech Ltd reported in 2009-TIOL-293-HC-DEL-ST. In this case the Departmental Counsel informed the court that the Department is in the in the process of filing a review petition in the Hindustan Zinc case. (which has since been dismissed)
He also informed that the Department is in the process of filing an appeal against the judgment of Bombay High Court in Indian National Shipowners Association case. And sure enough they have filed an SLP in the Supreme Court which is at the admission stage.
Why is the government fond of so much litigation?
Hundreds of cases are pending at various stages from Assistant Commissioner to now the Supreme Court. And the entire litigation is now concentrated on the period from 1.1.2005 to 17.4.2006
Some two and a half years ago, Board created history by 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 it closed more than 30,000 Show Cause Notices. It had ordered that demands need not be issued even if there are CAG objections.
It is another opportunity for the dynamic Chairman of CBEC and Member, Service Tax 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. Withdraw all those cases and let there be some peace. Let us all use that time and money in more productive work.