Recipient liability for foreign services did not arise before Section 66A, so pre-2006 service tax demand failed.

Service tax could not be fastened on the recipient of services from a foreign service provider for the period before 18.04.2006, because the levy on the recipient arose only with the statutory introduction of Section 66A of the Finance Act, 2006. The Tribunal followed the binding view that the pre-Section 66A rule purporting to impose recipient liability was not sustainable for that earlier period. Accordingly, the demand for service tax prior to 18.04.2006 was held unsustainable, and the order relieving the respondent from liability was upheld.

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Issues: Whether service tax could be levied on the recipient of services from a foreign service provider for the period prior to 18.04.2006, before introduction of Section 66A of the Finance Act, 2006.

Analysis: The Tribunal followed the binding view that, prior to the introduction of Section 66A of the Finance Act, 2006, the recipient of taxable services from a foreign service provider could not be fastened with service tax liability. The reasoning proceeded on the basis that the relevant rule making the recipient liable was not sustainable for the pre-18.04.2006 period, and that the levy on the recipient commenced only with the statutory introduction of Section 66A.

Conclusion: The service tax demand for the period prior to 18.04.2006 was not sustainable and the order relieving the respondent from liability was upheld.

Final Conclusion: The appeal challenging deletion of the service tax demand failed, and the respondent's non-liability for the pre-18.04.2006 period stood confirmed.

Ratio Decidendi: A recipient of services from a foreign service provider was not liable to service tax for the period prior to the statutory introduction of Section 66A of the Finance Act, 2006.

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