Pre-Section 66A service tax liability on foreign services was not prima facie payable by the Indian recipient, justifying unconditional stay.

For the period before Section 66A of the Finance Act, 1994 came into force on 18-4-2006, a service recipient in India was not prima facie liable to pay service tax on services received from a foreign provider without an office in India. In that setting, the Tribunal held that the assessee had made out a strong prima facie case and was entitled to unconditional stay of the pre-deposit of service tax and equal penalty. The contrary reliance on an interim stay order was distinguished, while the earlier Larger Bench view supporting the assessee was noted.

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Issues: Whether the appellant was entitled to waiver of pre-deposit and unconditional stay in respect of service tax and equal penalty demanded for services received from a foreign service provider for the period prior to 18-4-2006.

Analysis: The Tribunal noted that the liability of a recipient in India to pay service tax on services received from a foreign person without an office in India had been held not to arise before 18-4-2006, when Section 66A of the Finance Act, 1994 was enacted. That view had already been taken by High Courts and stood confirmed by the dismissal of the Revenue's appeals. In that background, the appellant was found to have made out a strong prima facie case. The contrary reliance on an interim stay order was distinguished, and the earlier Larger Bench view supporting the assessee was noticed.

Conclusion: The appellant was entitled to unconditional stay of pre-deposit.

Ratio Decidendi: For the period prior to the enactment of Section 66A of the Finance Act, 1994, a service recipient in India was not prima facie liable to pay service tax on services received from a foreign service provider without an office in India, warranting waiver of pre-deposit.

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