Import of services whether liability of recipient prior to 18-4-2006 existed? Charging section i.e., section 66A of the Finance Act, 1994 introduced w.e.f. 18-4-2006, demand prior to 18-4-2006, relying on Rule 2(1)(d)(iv) of the Service Tax Rules, wholly impermissible.

Facts:

The assessee received management consultant’s service from the service provider stationed outside India. The Department relied on Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 to recover service tax from the assessee on the premise that the service was provided by a person from a country other than India but the service was received by the assessee in India. The Tribunal relying on the decisions in the case of Indian National Shipowners Association v. Union of India, 2009 (13) STR 235 held that the assessee was not liable to pay any service tax for the period prior to 18-4-2006, the date with effect from which section 66A was introduced in the Finance Act, 1994. The Revenue contended that the facts in the aforementioned case were different and that in the present case the management consultant service was received in India. The respondent contended that in absence of any charging section prior to 18-4-2006, reliance could not be placed on Rule 2(1)(d)(iv) of the Service Tax Rules, 1994 to levy service tax from the recipient.

Held:

Following the judgments in the case of Laghu Udyog Bharti v. Union of India, 2006 (2) STR 276 SC and Indian National Shipowners Association v. Union of India, 2009 (13) STR 235, the Court held that any demand of service tax in absence of the charging section prior to 18-4-2006 by merely rely-ing on Rule 2(1)(d)(iv) was wholly impermissible.