Offshore services outside India were not subject to service tax before the statutory amendment brought them within the tax net.

Offshore services rendered outside India were not chargeable to service tax for the period before the statutory amendment expressly brought such services into the tax net. The Tribunal accepted that the agreement and billing structure separated onshore from offshore services, and held that the offshore portion was performed beyond territorial waters and outside the relevant tax charge. Relying on the service tax circular and the later amendment, it set aside the demand and penalties for fresh adjudication by the Original Authority after hearing the assessee.

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Issues: Whether services rendered outside India as offshore services were liable to service tax for the relevant period prior to the insertion of the new service tax provision, and whether the demand and penalties could be sustained.

Analysis: The Tribunal accepted the view that the agreement and billing arrangement indicated identifiable onshore and offshore services, and that the offshore portion was rendered outside India. It further relied on the service tax circular stating that services provided beyond territorial waters were not liable to service tax for the relevant period. The reasoning adopted was that liability for such offshore services arose only after the later statutory amendment, and not for the earlier period in dispute.

Conclusion: The demand on the offshore services could not be sustained for the relevant period, and the matter required fresh consideration by the Original Authority.

Final Conclusion: The assessee obtained relief on the service-taxability issue, and the adjudication was set aside for reconsideration after granting an opportunity of hearing.

Ratio Decidendi: Offshore services rendered outside India were not chargeable to service tax for the period prior to the statutory amendment that expressly brought such services within the tax net.

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