Appellate Tribunal clarifies service tax liability date, rules in favor of appellant

The Appellate Tribunal set aside the order holding the appellant liable for service tax on a reverse charge basis for services received from a non-resident service provider. The tribunal clarified that service tax liability under Section 66A of the Finance Act, 1994, only arises from 18.04.2006, not from an earlier date as contended by the tax department. The appeal was allowed, providing consequential reliefs in accordance with the law and emphasizing the correct interpretation of the effective date for service tax liability in such cases.

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Issues:
1. Service tax liability under reverse charge basis for payments made to a non-resident service provider.
2. Interpretation of Section 66A of the Finance Act, 1994 regarding the effective date of service tax liability.

Analysis:
1. The case involved a dispute regarding the service tax liability under reverse charge basis for payments made to a non-resident service provider, M/s. Meridian S.A. France. The department contended that the appellant should have discharged service tax liability based on the agreement entered with the non-resident service provider. The original authority confirmed the demand, including interest and penalties. However, on appeal, the ld. Commissioner (Appeals) modified the order concerning the import of service, noting that service tax liability would not arise prior to 18.04.2006 when Section 66A was inserted in the Finance Act, 1994. The appellant subsequently filed a refund claim for the period up to 17.04.2006, which was partially sanctioned by the competent authority. The department appealed this sanction order, leading to the impugned order by the ld. Commissioner (Appeals) holding the appellant liable to pay service tax on reverse charge basis for services received from the non-resident service provider.

2. During the hearing, the appellant's counsel pointed out that the impugned order was based on the wrong premise that service tax liability arose from 01.01.2005, while Section 66A was inserted in the Act only from 18.04.2006. The counsel argued that service tax liability would only arise from the latter date. The department's representative conceded that tax liability under Section 66A would indeed arise from 18.04.2006. Consequently, the Appellate Tribunal found that the impugned order had no legal basis and set it aside, allowing the appeal with consequential reliefs as per law. The judgment clarified the interpretation of Section 66A and its implications on the service tax liability for payments made to non-resident service providers, emphasizing the effective date from which such liability arises.

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