Service tax on overseas commission was not payable before 18.04.2006, and refund claims for tax paid under protest were maintainable.

Service tax did not apply to commission paid to overseas agents for periods before 18.04.2006 because the charging mechanism for services received from abroad arose only when Section 66A of the Finance Act, 1994 came into force. A notification could not create tax liability in the absence of a corresponding charging provision, and the view was supported by the Bombay High Court ruling in Indian National Shipowners Association and the relevant Board circular. Refund claims for tax paid under protest were therefore maintainable, and the appeals failed.

---

---

Issues: Whether service tax was payable on commission paid to overseas agents for the period prior to 18.04.2006 and whether the refund claims of tax paid under protest were rightly allowed.

Analysis: The taxable liability in respect of services received from a provider situated abroad arose only on and from 18.04.2006, when the statutory mechanism under Section 66A of the Finance Act, 1994 came into force. For the period prior to that date, the commission paid to overseas agents could not be subjected to service tax. The reliance placed on the Bombay High Court decision in Indian National Shipowners Association, which was stated to have been upheld by the Supreme Court, and the supporting Board circular, was accepted. The notification relied upon by Revenue could not override the absence of a corresponding charging provision before 18.04.2006.

Conclusion: Service tax was not payable on the impugned commission payments for the period prior to 18.04.2006, and the refund claims were maintainable. The appeals were therefore liable to fail.

---