TaxTMI 
TaxTMI 
2008 (11) TMI 116
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....roduct in those countries. They were to be paid commission at on a percentage basis, 3% certain cases and 11% in certain other cases of the value of the goods shipped. The contract also included a clause that the total commission paid includes levy and tax imposed, may be imposed by any Government/regulatory authorities in India or Overseas from time to time whether to be detected or to be deposited by principal or on behalf of the agent. (c) The original authority held that the services rendered by the above Overseas parties are treated as Business Auxiliary Service 65 (105) (zzb) and accordingly, confirmed the demand relating to the period 9.7.04 to 15.6.05 amounting to Rs.9,00,438/- and imposed penalties under various Sections. (d) The matter was taken on appeal before the Commissioner (Appeals), who upheld the order of demand, upheld the penalty imposed under Section 78 and reduced the penalty imposed under Sections 76 & 77. 4. The learned Advocate for the appellant made the following submissions: (a) The levy of Service tax has two major limbs-one dealing with charging section and the other dealing with the person on whom the liability is fastened. (b) The servi....
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.... 5. Learned DR made the following submissions: (a) The amendment by way of insertion of Section 66A, no doubt, makes abundantly clear that offshore services are liable to tax in the hands of recipient. (b) Even for earlier period, the service tax is leviable in view of Notification No.12/2002 dated 1.8.02 inserting sub-clause (4) in rule 2(1)(2) of the Service Tax Rules, providing for payment of tax for the recipient of the taxable service. He also relies on the Explanation to Section 65 (105) inserted by Finance Act with effect from 16.6.05, the Explanation removed the doubts that in respect of such offshore services the recipient shall be liable to pay service tax. (c) At any rate, the Larger Bench in the case of Hindustan Zinc Ltd. has decided that from 1.1.2005 the recipients are liable to service tax on such offshore service received by them. 6.1 We have carefully considered the submission from both sides. No doubt, that the services are rendered/received in connection with sale/marketing of goods manufactured in India. On a careful perusal of the contract entered into between the appellant and the Overseas agent, we find that the substantial activities in pursua....
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....x at the rate of 5% of the taxable services referred to in sub-clauses (g), (h), (i), (j), (k), (1), (m) and (o) of clause (48) of Section 65 and collected in such manner as may be prescribed." Section 67 contained provisions regarding valuation of the taxable service, that is, the measure of tax. Section 68 dealt with payment, that is, who shall pay the tax and the manner. Having regard to the significance of the provisions of section 68 in the instant case, it may be quoted verbatim as follows:- "68. (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any-taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service." Continuing with the scheme, Section 69 contained provisions regarding ....
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....side. Where the service is provided from outside India or by a non-resident who does not have office in India, it is clear that the provider of the service cannot be fastened with the liability, and therefore, a different provision has to be made with respect to such services. It is to be kept in mind that the levy is on rendering of the taxable service and not on the person. No sooner than the taxable event takes place, tax must be collected and therefore provision has to be made to fasten the liability to pay tax. As observed above, the person liable to pay the tax is a component of the tax scheme. Since the liability to pay service tax generally is on the provider of service, where liability is to be fastened on any other person, the service (s) in relation to which liability is to be so fastened, has also to be identified and specified. U is relevant to mention that services had been specified in the erstwhile sub-section (1A) of Section 68, itself, - corresponding to present sub-section (2) in which it has now been left to the Central Government to do so by notification. 15. On behalf of the Revenue, attention was drawn to the Explanation inserted at the end of sub-section ....
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....stablishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and (b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be the taxable 419service, and such taxable service shall be treated as if the recipient had himself provided the service iii India, and accordingly all the provisions of this Chapter shall apply: PROVIDED that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply: PROVIDED FURTHER that where the provider of the service has his business establishment both m that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided. (2) Where a person is carrying on a business th....