TaxTMI 
TaxTMI 
2008 (6) TMI 6
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....the said decisions this appeal was referred to Larger Bench for an authoritative pronouncement on the issue. 2. The scheme of the law relating to service tax so far as relevant may briefly be noticed. The provisions are contained in Chapter V of the Finance Act, 1994 as amended from time to time. As the dispute herein pertains to the period from January, 2004 to July, 2005, the provisions as they stood during the relevant period, only need be noticed. Section 65 which is the definition clause, inter alia, defines 'taxable service'. The taxable service with which we are concerned in this appeal is 'consulting engineer' service figuring at sub-clause (g) of clause (48) of section 65 at the relevant time. Section 66 is the charging provision. At the relevant time it comprised of five sub-sections. Sub-section (3) which dealt with the 'consulting engineer' service laid down:- "With effect from the date notified under Section 88 of the Finance Act, 1997 (26 of 1997), there shall be levied a service tax at the rate of 5% of the taxable services referred to in sub-clauses (g),(h),(i),(j),(k),(l),(m) and (o) of clause (48) of Section 65 and collected in such manner as may be prescrib....
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....ST dated 1.8.2002 with effect from 16.8.2002. In view of its significance, the same may also be quoted as under: "(d) Person liable for paying service tax means, ………………………………………………………………… (iv) in relation to any taxable service provided by a person who is a non-resident or is from outside India, and does not have any office in India, the person receiving taxable service in India." 4. The issue which arises for consideration is whether by virtue of notification no. 12/2002 dated 1.8.2002 inserting sub-clause (iv) in rule 2(1)(d) of the Rules, the recipient of the taxable service provided by a non resident or from outside India, who does not have any office in India, became the "person liable to pay service tax" in terms of section 68 (2) of the Act. if so, they became liable from 16.8.2002 itself - as contended on behalf of the Revenue. The case of the appellant, on the other hand, is that unless the taxable service, as such, in relation to which the person - other provider of the service - is liable to pay service tax, is notified by the Central Government, that person cannot be held liable to pay the tax, which according t....
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....rvice tax under Section 68, read with section 66 which is the charging section. As seen above, section 68 (2) envisages specifying the 'services' in relation to which a person other than the service provider is to be made liable to pay service tax; it also envisages specifying the 'person' - other than the service provider - to be made liable to pay service tax. While the former is to be done by way of notification, the latter can be done by making rules. It is well known that where the law provides the manner for doing something, it should be done in that manner or not at all. It is relevant to mention here that while notification no. 12/2002 was issued amending the Service Tax Rules in exercise of rule making power under section 94 of the Act, notification no. 36/2004 was issued in exercise of powers under section 68(2). 8. It would be appropriate to quote notification no. 36/2004 in extenso as under: "In exercise of the powers conferred by sub-section (2) of section 68 of the Finance Act, 1994 (32 of 1994), the Central Government hereby notifies the following taxable services for the purpose of the said sub-section namely: (A) the services: (i) in relation to a telep....
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.... statute. The notification/amendment simply enlarged the definition of 'person liable to pay service tax' in relation to "any taxable service provided by a person who is a non-resident or from outside India, does not have any office in India" making the recipient of such service liable to pay service tax. It did not specify, and possibly could not have, the particular service or services in relation to which recipient would be liable to pay service tax. This was done by notification no. 36/2002 which was issued under Section 68(2) of the Act specifying the taxable service "for the purposes of" the said sub-section i.e. sub-section (2) of section 68. 10. As seen above, four services (as seen above) were (initially specified in Part A of notification no. 36/2004 dated 31.12.2004. The service specified in Part B was omnibus, namely, "any taxable service" meaning thereby all types of taxable services provided by a person who is a non-resident or is from outside India and does not have any office in India. In other words, apart from the four services specifically mentioned as items (i)(ii)(iii) and (iv) in Part A, where 'any' taxable service is provided from outside India, by a non-r....
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....behalf of the appellant attention was drawn to the fact that whenever any addition was made in the list of taxable service for the purposes of Section 68 (2), corresponding amendment was made in the Rules i.e. Rule 2 (1) (d) of the Service Tax Rules. For example, the service 'in relation to business auxiliary service of distribution of mutual fund by mutual fund distributor or an agent' and 'in relation to sponsorship service provided to any body corporate or firm located in India' were specified by Notification No. 5/2005-ST dated 1.3.2005 and Notification No. 16/2006 dated 25.4.2006, respectively. Corresponding amendments were made inserting clauses (vi) and (vii) in Rule 2 (1) (d) of the Service Tax Rules with effect from 1.4.2005 and 1.5.2006 which reflect the understanding of the Central Government that making amendment in the Service Tax Rules or the List of the services under Section 68 (2) alone is not sufficient, and amendments have to be made in the Rules to make the 'person' liable to pay service tax as well as in the List of taxable services of specify the taxable service (s) in relation to which such person is made liable to pay service tax. A combined reading of Notif....
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....lict between Sections 65, 66, 68 (1) and 71 of the Finance Act, 1994 as amended in 1997 on the one hand and Rules 2 (1) (d) (xii) and (xvii) of the Service Tax Rules, 1994 on the other. Each of these sections of the Finance Act, 1994 as amended in 1997 proceeded on the basis that the tax was imposable on the person providing the service. All other sections regarding the liability to furnish returns, assessments, penalties etc. flowed from that. It was because unamended Section 66 spoke of the liability to pay tax in respect of services 'which are provided to any person by the person responsible for collecting the service tax' and Section 65 (5) defined 'assessee' as meaning 'a person responsible for collecting the service tax', that this Court held that Clauses (xii) and (xvii) of Rule 2 (1) (d) of the Service Tax Rules were illegal. 23. As we have said, Rule 2 (1) (d) (xii) and (xvii) had been held to be illegal in Laghu Udyog Bharti only because the charging provisions of the Act provided otherwise. Now that the charging section itself has been amended so as to make the provisions of the Act and the rules compatible, the criticism of the earlier law upheld by this Court can no....