CESTAT rules no service tax on payments to foreign agents pre-specific dates

The Appellate Tribunal CESTAT NEW DELHI ruled in favor of M/s. VMT Spg. Co. Ltd., M/s. Arisht Spg. Mills, M/s. VSGM, and M/s. Malwa Cotton Spg. Mills against CCE, Chandigarh. The Tribunal held that service tax was not applicable on payments to foreign commission agents for the period before specific dates as per relevant case laws and circulars. Citing precedents and statutory provisions, the Tribunal aligned its decision with the Bombay High Court's ruling, setting aside the orders and granting relief to the appellants.

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In the Appellate Tribunal CESTAT NEW DELHI case of M/s. VMT Spg. Co. Ltd., M/s. Arisht Spg. Mills, M/s. VSGM, and M/s. Malwa Cotton Spg. Mills versus CCE, Chandigarh, the common issue involved was whether service tax was applicable on payments made to foreign commission agents. The dispute period was from July 2004 to 15 June 2005. The Tribunal considered the case law of Hindustan Zinc Ltd. vs. CCE, Jaipur and M/s. Anant Spg. Mills vs. CCE, Bhopal. The former held that service tax was not liable prior to 1 January 2005 for services provided by non-residents without an office in India. The latter stated that offshore services were not taxable before 18 April 2006. The Tribunal also referenced Circular No. 36/4/01 stating that services beyond territorial waters were not subject to service tax. The decision in the case of Foster Wheeler Energy Ltd. was cited to support the appeals. The Hon'ble Bombay High Court's ruling in Indian National Shipowners Association vs. UOI was also considered, which stated that service tax could only be levied after the insertion of Section 66A of the Finance Act, 1994 on 18 April 2006. The Tribunal's decision aligned with the Bombay High Court's ruling and set aside the impugned orders, allowing all the appeals with consequential relief. The dictation and pronouncement of the decision occurred in an open court.

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