Tribunal overturns Service Tax demand pre-2006 citing Indian National Shipowners case

The Tribunal set aside the order demanding Service Tax from the appellants for the period before 18-4-2006, citing the relevance of a decision in the Indian National Shipowners Association case and the dismissal of the Special Leave Petition against it. The appeal was allowed with consequential relief in accordance with the law.

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Issues:
Challenge to levy of Service Tax against the appellants who are recipients of services from foreign-based firms.

Analysis:
The appeal challenged the imposition of Service Tax on the appellants, arguing that they should not be liable to pay Service Tax before 18-4-2006 when section 66A was introduced in the Finance Act, 1994. The appellant's advocate cited a decision by the Hon'ble High Court of Bombay in a related case, supported by the dismissal of the Special Leave Petition (SLP) by the Supreme Court. On the contrary, the Senior Departmental Representative (SDR) contended that the levy of Service Tax on the recipient was valid from 1-1-2005, referring to a decision by the Larger Bench of the Tribunal in the Hindustan Zinc Ltd. case. The Tribunal noted the dispute in the Hindustan Zinc Ltd. case regarding the liability of the recipient to pay Service Tax before 1-1-2005, which was not interfered with by the Supreme Court. However, the Tribunal found that the decision in the Indian National Shipowners Association case was more relevant to the present case, as it addressed the impact of the introduction of section 66A of the Finance Act. Given the dismissal of the SLP against the Indian National Shipowners Association case, the Tribunal concluded that the order demanding Service Tax for the period before 18-4-2006 could not be upheld.

In conclusion, the Tribunal set aside the impugned order demanding Service Tax for the period before 18-4-2006 and allowed the appeal with consequential relief as per the law.

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