Service Tax Not paid by Service Recipients
C & AG in his report at Para 2.2 of Report No. 13 of 2009-10 (Indirect taxes - Service Tax) states that Rule 2 (1) (d) (iv) of the Service Tax Rules, 1994, stipulates that in respect of taxable service provided by a person, who is a non-resident or is from outside India and does not have an office in India, the person receiving the taxable service in India is liable to pay service tax.
Based on this the Audit has raised several objections involving service tax running into crores of rupees. The objections were raised in the taxable service category of ‘intellectual property rights service', ‘banking & other financial services', ‘business auxiliary services', ‘management consultants service', ‘consulting engineer's service.
The issues were raised under this head covering a period both prior to and after 18.04.2006, the date from which Section 66A was brought onto the statute book. It is common knowledge in the field that this date is regarded as the date from which service recipients are taxable for import of services as has been held by the Mumbai High Court in M/s Indian National Shipowners Association case which was also upheld by the Supreme Court by dismissing the SLP filed by Revenue 2009-TIOL-129-SC-ST. This judgment effectively buried Rule 2 (1)(d)(iv) in so far as it relates to leviability of service tax on import of services.
It is another matter whether the services received by the recipients in India in the cases highlighted by the C & AG are taxable at all or not under the respective taxable service categories mentioned by C & AG, because it depends on individual facts and circumstances of each case. But the date from which import of services in the hands of recipients is liable for service tax was settled once and for all by the Apex Court in the Indian National Shipowners Association case . Now in this backdrop what is the point in raising issue of taxability of imports prior to 18.04.2006? Is this another case of selective amnesia?