TMI Blog2008 (11) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant facts, in brief, are as follows: (a) The appellant is a manufacturer of yarn. They are also exporting to various countries. (b) Appellant entered into agreement with certain overseas parties with a view to solicit orders from the overseas market in China, Japan, Hong Kong, Korea, Indonesia, Thailand etc. The agents are required to undertake services in connection with sale and promotion of the above product in those countries. They were to be paid commission at on a percentage basis, 3% certain cases and 11% in certain other cases of the value of the goods shipped. The contract also included a clause that the total commission paid includes levy and tax imposed, may be imposed by any Government/regulatory authorities in India or Overseas from time to time whether to be detected or to be deposited by principal or on behalf of the agent. (c) The original authority held that the services rendered by the above Overseas parties are treated as Business Auxiliary Service 65 (105) (zzb) and accordingly, confirmed the demand relating to the period 9.7.04 to 15.6.05 amounting to Rs.9,00,438/- and imposed penalties under various Sections. (d) The matter was taken on appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said decision and submitted that such offshore services are liable to tax only with effect from 18.4.06. (g) It was alternatively submitted that there was no suppression of any relevant facts and therefore, even if it is held that service tax is leviable, show cause notice having been issued on 13.6.06 demanding tax relating to the period 9.7.04 to 15.6.05, substantial part of the demand is time barred. 5. Learned DR made the following submissions: (a) The amendment by way of insertion of Section 66A, no doubt, makes abundantly clear that offshore services are liable to tax in the hands of recipient. (b) Even for earlier period, the service tax is leviable in view of Notification No.12/2002 dated 1.8.02 inserting sub-clause (4) in rule 2(1)(2) of the Service Tax Rules, providing for payment of tax for the recipient of the taxable service. He also relies on the Explanation to Section 65 (105) inserted by Finance Act with effect from 16.6.05, the Explanation removed the doubts that in respect of such offshore services the recipient shall be liable to pay service tax. (c) At any rate, the Larger Bench in the case of Hindustan Zinc Ltd. has decided that from 1.1.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 'consulting engineer' service figuring at sub-clause (g) of clause (48) of section 65 at the relevant time. Section 66 is the charging provision. At the relevant time it comprised of five sub-sections. Sub-section (3) which dealt with the 'consulting engineer' service laid down: "With effect from the date notified under Section 88 of the Finance Act, 1997 (26 of 1997), there shall be levied a service tax at the rate of 5% of the taxable services referred to in sub-clauses (g), (h), (i), (j), (k), (1), (m) and (o) of clause (48) of Section 65 and collected in such manner as may be prescribed." Section 67 contained provisions regarding valuation of the taxable service, that is, the measure of tax. Section 68 dealt with payment, that is, who shall pay the tax and the manner. Having regard to the significance of the provisions of section 68 in the instant case, it may be quoted verbatim as follows:- "68. (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any-taxable service notifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hink that the 'taxable service' referred to in Part B of notification no.36/2004 is part of the 'taxable service' referred to in various sub-clauses of clause (48) [now clause (105)] of Section 65. It need hardly be explained that a number of 'taxable services' can be provided inside India as well as from abroad. For example, 'consulting engineer' service itself can be provided both inside and from outside. Where the service is provided from outside India or by a non-resident who does not have office in India, it is clear that the provider of the service cannot be fastened with the liability, and therefore, a different provision has to be made with respect to such services. It is to be kept in mind that the levy is on rendering of the taxable service and not on the person. No sooner than the taxable event takes place, tax must be collected and therefore provision has to be made to fasten the liability to pay tax. As observed above, the person liable to pay the tax is a component of the tax scheme. Since the liability to pay service tax generally is on the provider of service, where liability is to be fastened on any other person, the service (s) in relation to which liability is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax in view of various changes that have happened in the service tax relating to this aspect. 6.5 We would like to reproduce Section 66A at this juncture: "[ 66A. Charge of service tax on services received from outside India (1) Where any service specified in clause (105) of section 65 is,- (a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be the taxable 419service, and such taxable service shall be treated as if the recipient had himself provided the service iii India, and accordingly all the provisions of this Chapter shall apply: PROVIDED that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a much higher amount by classifying the onshore services as offshore services, just to avoid some percentage as service tax. 6.8 We also noticed that there has been an amendment by way of inserting Section 66A in the Service Tax Provisions by the Finance Act, 2006 w.e.f. 18-4-2006. There is no doubt that the services rendered are ultimately in relation to setting up of the LNG terminal in India. Nevertheless, no reliable evidence has been adduced to contradict the claim of the appellant that the services claimed by them as offshore services are not offshore services. Such offshore services are liable for tax consequent to the amendment w.e.f. 18-4-2006, but for earlier period the same will not be so. 6.9 Service Tax Circular No. 36/4/01 dt. 8-10-2001 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. Therefore, the appellant's contention that the demand on services relating to identified offshore services cannot be subjected to service tax during the relevant/period is acceptable." 7. As we find that the issues ..... X X X X Extracts X X X X X X X X Extracts X X X X
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