Earlier CBEC has issued a circular no. 36/4/2001 dated 8-10-2001 stating that,

"Chapter V of the Finance Act which governs the levy of Service Tax has not extended to the levy to designated areas in the Continental Shelf and the Exclusive Economic Zone of India (as has been done in case of Central Excise vide Notification No. 166/87-C.E., dated 11-6-87 and in case of Customs by Notification Nos. 11/87-Cus., Dated 14-1-87 & 64/97-Cus., dated 1-12-97). It is, therefore, clarified that the services provided beyond the territorial waters of India are not liable to Service Tax as provisions of Service tax have not been extended to such areas so far."

This circular has lost its relevance with effect from 18-04-2006 with the insertion of new Section 66A in the Chapter V of the Finance Act, 1994 (Service Tax).

On the basis of above facts and circumstances, honorable tribunal in the matter of M/s  Foster Wheeler Energy Ltd. V. Commissioner of Central Excise & C, Vadodara-II reported in 2007 -TMI - 1457 - CESTAT, AHMEDABAD  has held that,

"the services rendered are ultimately in relation to setting up of the LNG terminal in India. Nevertheless, no reliable evidence has been adduced to contradict the claim of the appellant that the services claimed by them as off-shore services are not offshore services. Such offshore services are liable for tax consequent to the amendment w.e.f. 18-4-2006, but for earlier period the same will not be so."

"Consequently, the demand of service tax towards off-shore services has set aside."

Off shore services taxation: amendment rendered such services chargeable to service tax after the amendment, earlier periods held not taxable. A prior administrative circular excluded services beyond territorial waters from service tax, but a later statutory amendment expanded the levy so that offshore services may be chargeable going forward; the tribunal held contested offshore services taxable from the amendment's effective date but not for periods before it, and set aside earlier demands.