Reverse charge service tax on imported services arose only after statutory authority came into force.

Service tax could not be levied in India on the recipient of services received from foreign-based providers before Section 66A came into force on 18.04.2006. The charging provision taxed the person rendering the service, and liability could not be shifted to the recipient by delegated rules or a notification in the absence of statutory authority. Rule 2(d)(iv) of the Service Tax Rules, 1994 and Notification No. 12/2002-ST were insufficient to create the levy. The demand for the prior period was therefore unsustainable.

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Issues: Whether service tax could be levied on the recipient in India for services received from foreign-based service providers prior to 18.04.2006.

Analysis: The levy of service tax is on the person rendering the service, and liability cannot be shifted to the recipient merely by a rule. Prior to insertion of Section 66A of the Finance Act, 2006 with effect from 18.04.2006, there was no statutory authority to tax a person in India as recipient of services received from abroad. Rule 2(d)(iv) of the Service Tax Rules, 1994 and Notification No. 12/2002-ST could not override the charging provision or create the levy before the statutory amendment.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Final Conclusion: The appeal failed and the demand could not be sustained for the period prior to 18.04.2006.

Ratio Decidendi: Service tax on services received from abroad by a person in India became leviable only after Section 66A of the Finance Act, 2006 came into force; a delegated rule cannot impose such liability in the absence of statutory authority.

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