Reverse-charge service tax on foreign services failed before section 66A created the charging basis.

In the absence of a charging provision, reverse-charge service tax could not be imposed on the recipient for services received from a non-resident or person outside India. Rule 2(1)(d)(iv) of the Service Tax Rules, 2002 could not by itself create the tax liability, because the statutory basis for such levy arose only with insertion of section 66A of the Finance Act, 1994. As the relevant period preceded section 66A, the levy on the recipient for that period was unsustainable.

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Issues: Whether, during the relevant period, service tax could be fastened on the recipient of services received from a non-resident or person outside India, in the absence of section 66A of the Finance Act, 1994.

Analysis: The liability of the recipient was examined with reference to the statutory scheme and the governing judicial position. It was held that rule 2(1)(d)(iv) of the Service Tax Rules, 2002 could not, by itself, create a charging liability on the recipient for services received from outside India, because the statutory basis for such reverse-charge liability arose only with the insertion of section 66A of the Finance Act, 1994. The relevant period preceded that provision, and the levy on the recipient for that period was therefore unsustainable.

Conclusion: The recipient was not liable to pay service tax for the period in question merely because the service provider was non-resident or situated outside India.

Ratio Decidendi: In the absence of a charging provision creating reverse-charge liability, a rule cannot impose service tax on the recipient for services received from a non-resident or person outside India before the commencement of section 66A of the Finance Act, 1994.

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