Whether Service Received prior to 1.1.2005 liable to service tax?

AIT News Network

MUMBAI. The issue of leviability of Service Tax, on services received prior to 1.1.2005,by the recipient of  services from a company which is situated abroad has been referred to the Larger Bench of the Tribunal vide AIT-2008-60-CESTAT

The Tribunal held that “conflicting views have been expressed by the various Benches who have dealt with this issue and in view of the conflicting decisions, we find that as prayed by the learned JDR, this is a fit case for referring the matter to the Larger Bench. Therefore, in view of our observations, the question of leviability of Service Tax on the service recipient prior to 1-1-2005 has to be decided in view of the conflicting decisions of the Tribunal on the matter. Therefore, the above question should be decided by a Larger Bench.”

In the case of AIT-2008-56-CESTAT wherein the Tribunal ruled as under:

“the service receiver of the services provided by the non-resident was notified by the Central Government as liable to pay the Service Tax from 1-1-2005. This would indicate that prior to this date, a service receiver from the non-resident service provider was not liable to pay the service tax.

This provision in itself may not suffice revenue to direct the appellant to discharge the service tax liability as service receiver, on the face of the fact that notification under Section 68(2) of the Finance Act 1994, was issued by the Central Government only on 31-12-2004. If the contention of the learned SDR is to be accepted, then there was no necessity for the Government to issue Notification No. 36/2004-S.T. notifying the Service receiver from non-resident having no office, to pay Service tax, as receiver. By issuing the said Notification, Central Government intended to tax the service receiver from non-resident, with effect from 1-1-2005, which, in corollary would be that no Service tax is payable by this category prior to 1-1-2005.

the rules are subservient to the sections and if section do not provide for discharge of tax by the recipient of services from non-resident having no office, then it would be a futile exercise to rely upon the rules to collect the tax”

This decision was also followed by the Tribunal in the case of – AIT-2008-58-CESTAT

On the contrary the Tribunal presided over by the President in the case of AIT-2008-57-CESTAT held that with effect from 16-8-2002 the liability to pay Service Tax for the services received from a company abroad is on the recipient. This view was also taken in the case of AIT-2008-59-CESTAT  

(Click here for full text of Ruling AIT-2008-60-CESTAT)

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