No Service Tax services rendered abroad before 18.4.2006 - CESTAT
It has finally come! There is no Service Tax on services rendered abroad. In a landmark judgement, the Ahmedabad Bench of the Tribunal has held that services rendered abroad are not taxable prior to 18.4.2006 when Section 66A was inserted into the Finance Act, 1994.
Though it is an eminently welcome order, there are certain questions which this order is bound to raise.
1. Section 66A came into force from 18.4.2006, but the same was inserted as an explanation to Section 65(105) with effect from 16.6.2005. Now what is the status of that explanation? But The Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, came into existence from 19.4.2006.
2. The Tribunal has relied on a Board Circular No.36/4/01 dt. 8/10/2001 and held that this circular holds that service provided beyond the territorial waters will not attract service tax. This circular will be relevant till the amendment brought out in service tax laws by insertion of Section 66A w.e.f. 18/4/2006. This circular was regarding the liability of Service Tax in the Continental Shelf and the Exclusive Economic Zone of India. The Circular reads as,
I am directed to say that question has arisen whether services provided outside the limits of the Indian territorial waters are liable to Service Tax or not.
The matter has been examined. At present the levy of service tax extends to the whole of India except the State of Jammu and Kashmir. The expression “India” includes the territorial waters of India. Indian territorial waters extend up to twelve nautical miles from the Indian land mass. Chapter V of the Finance Act which governs the levy of Service Tax has not extended to the levy to designated areas in the Continental Shelf and the Exclusive Economic Zone of India (as has been done in case of Central Excise vide Notification No. 166/87-C.E., dated 11-6-87 and in case of Customs by Notification Nos. 11/87-Cus., Dated 14-1-87 & 64/97-Cus., dated 1-12-97). It is, therefore, clarified that the services provided beyond the territorial waters of India are not liable to Service Tax as provisions of Service tax have not been extended to such areas so far.
And this lapse has been rectified by Notification No. 1/2002-Service Tax, dated 1-3-2002 when Service Tax when Service Tax was extended to the designated areas in the Continental Shelf and Exclusive Economic Zone of India. So that circular lost its validity on 1.3.2002.
In fact the Board should have withdrawn this circular on 1.3.2002. Maintaining a large mortuary will lead to skeletons rising up and menacingly dancing before future law.
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