Recipient-side service tax on foreign agent services was not sustainable before section 66A created statutory authority.

Service tax could not be levied on an Indian recipient for business auxiliary services received from foreign agents before section 66A of the Finance Act, 1994 came into force. The governing position was that, for the pre-section 66A period, there was no statutory authority to fasten recipient-side liability on services imported from abroad. The earlier Larger Bench view did not establish liability from 1 January 2005, and the subsequent High Court ruling confirmed that such tax could not be imposed for the pre-66A period. The demand for 16 June 2005 to 31 December 2005 was therefore not sustainable.

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Issues: Whether service tax could be levied on the recipient in India for services received from foreign agents for the period prior to the introduction of section 66A of the Finance Act, 1994.

Analysis: The dispute related to taxability of business auxiliary services received from foreign agents during 16.6.2005 to 31.12.2005. The governing position was that, before the insertion of section 66A, there was no statutory authority to fasten service tax liability on a person resident in India who received services from abroad. The earlier Larger Bench decision did not hold that liability existed from 1.1.2005, and the subsequent High Court ruling on the point made it clear that recipient liability could not be imposed for the pre-section 66A period.

Conclusion: The demand of service tax for the period 16.6.2005 to 31.12.2005 was not sustainable and the assessee succeeded on this issue.

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