Appellate Tribunal rules no service tax before Section 66A

The Appellate Tribunal CESTAT, New Delhi dismissed the Revenue's appeal challenging the demand for service tax for the period before the introduction of Section 66A of the Finance Act. The Tribunal held that prior to the introduction of Section 66A, there was no provision for taxing services provided outside India. Citing the Foaster Wheeler Engg. Ltd. case, the Tribunal ruled that the recipient of services became liable for service tax only after the introduction of Section 66A. Therefore, the demand for service tax for the period before Section 66A was deemed unsustainable, leading to the dismissal of the Revenue's appeal.

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Issues:
1. Demand for service tax for the period prior to the introduction of Section 66A of the Finance Act.
2. Liability of the recipient of services provided by a person residing outside India to pay service tax.
3. Interpretation of Rule 2(1)(d)(iv) of the relevant period.
4. Applicability of the decision in the case of Foaster Wheeler Engg. Ltd. regarding service tax liability for services provided outside India.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the Revenue challenging an order that set aside the demand for service tax for the period before the introduction of Section 66A of the Finance Act and the associated penalties. The assesses had engaged an overseas commission agent for auxiliary services, leading to a show cause notice for service tax demand. The Commissioner (Appeals) had set aside the demand and penalty beyond the normal limitation period. The assesses argued that services provided outside India were not taxable before the introduction of Section 66A, citing the decision in the Foaster Wheeler Engg. Ltd. case.

The Revenue contended that Rule 2(1)(d)(iv) made the recipient of services liable to pay service tax during the relevant period. The Counsel for the assesses pointed out that Rule 2(1)(d)(iv) was also amended post the relevant period to specify the person liable to pay service tax for services provided by a person outside India under Section 66A of the Act.

The Tribunal analyzed that prior to the introduction of Section 66A of the Finance Act, there was no charging section under the Act for services provided outside India. Referring to the Foaster Wheeler Engg. Ltd. case, the Tribunal held that the recipient of services provided outside India became liable for service tax with the amendment in Section 66A. As the demand in this case was for a period before the introduction of Section 66A, the Tribunal deemed it unsustainable and set it aside. Consequently, the cross objection by the assesses was allowed, and the appeal by the Revenue was dismissed as it pertained to the demand for the extended period.

In conclusion, the Tribunal dismissed the Revenue's appeal, emphasizing the non-sustainability of the demand for service tax for the period before the introduction of Section 66A of the Finance Act, in line with the legal provisions and precedents cited during the proceedings.

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