Offshore services received from abroad were not taxable in the recipient's hands before recipient-liability rules applied.

Offshore commission paid to a foreign brand company for services received from outside India, and with no office in India, was held not liable to service tax for the disputed period before recipient liability was statutorily introduced. The Tribunal followed its earlier view that services rendered from outside India were not exigible prior to the insertion of the recipient-liability provision, relied on the departmental circular stating that services provided beyond the territorial waters were outside the tax net until amendment, and noted the Larger Bench view on foreign consultancy services. The demand for the period in question was therefore unsustainable and the assessee succeeded on merits.

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Issues: Whether service tax was payable on commission paid to a foreign brand company for services received from outside India and not having any office in India, for the period prior to insertion of section 66A of the Finance Act, 1994 and for the period 1.1.2005 to 31.12.2005.

Analysis: The Tribunal followed its earlier decision holding that offshore services rendered from outside India were not exigible to service tax prior to the statutory insertion of section 66A with effect from 18.4.2006. It also relied on the departmental circular stating that services provided beyond the territorial waters would not attract service tax until the law was amended. The Larger Bench view that recipient liability for such foreign consultancy services did not arise prior to 1.1.2005 was also noted, and the demand for the disputed period was found to be contrary to the applicable legal position.

Conclusion: The demand of service tax on the assessee for the disputed period was not sustainable, and the assessee succeeded on merits.

Ratio Decidendi: Services received from a person situated outside India were not taxable in the recipient's hands for the relevant period before the statutory introduction of recipient liability under section 66A.

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