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Judgment
These writ petitions have been filed praying that this Court may be pleases to issue Writs of Declaration, declaring the provisions of Explanation
u/s 65(105) of the Finance Act, 1994 and Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, as introduced by the Finance Act, 2005 and
Notification No. 23/2005 ST, dated 7.6.2005, respectively, as ultravires of Articles 14, 19(1)(g), 245 and 265 of the Constitution of India, in so
far as the Petitioners are concerned.
At this stage of the hearing of the writ petitions, the learned Counsel appearing on behalf of the Petitioners had submitted that the issues arising
for the consideration of this Court, in the present writ petitions, had already been considered by a Division Bench of the High Court of Bombay, in
Indian National Shipowners Association V. Union of India (2009(1) STR 235 wherein it had been held as follows:
It appears that a similar provision in the rules was made applicable by the Government in relation to the Clearing Agents by making customers
of the Clearing Agent liable for levy of the service tax. That question has been decided by the Supreme Court by its judgment in the case of Laghu
Udyog Bharati (supra) and the Supreme Court has clearly laid down that the imposition of the service tax is on the persons rendering the services
and by making a provision in the Rules, levy of tax cannot be shifted to the recipients of the services and the Rule framed which brought about this
situation has been declared by the Supreme Court to be invalid. The law laid down by the Supreme Court in its judgment in Laghu Udyog (supra)
is squarely applicable to Rule 2(1)(d)(iv), which is relied on in this case. It appears that it is first time when the Act was amended and Section 66A
was inserted by Finance Act, 2006 w.e.f.18-4-2006, the Respondents got legal authority to levy service tax on the recipients of the taxable
service. Now, because of the enactment of Section 66A, a person who is resident in India or business in India becomes liable to be levied service
tax when he receives service outside India from a person who is non-resident or is from outside India. Before enactment of Section 66A it is
apparent that there was no authority vested by law in the Respondents to levy service tax on a person who is resident in India, but who receives
services outside India. In that case till Section 66-A was enacted a person liable was the one who rendered the services. In other words, it is only
after enactment of Section 66-A that taxable services received from abroad by a person belonging to India are taxed in the hands of the Indian
residents. In such cases, the Indian recipient of the taxable services is deemed to be a service provider. Before enactment of Section 66-A, there
was no such provision in the Act and therefore, the Respondents had no authority to levy service tax on the members of the Petitioners-
association.
In the result, therefore, the petition succeeds and is allowed. Respondents are restrained from levying service tax from the members of the
Petitioners-association for the period from 1-3-2002 till 17-4-2006, in relation to the services received by the vessels and ships of the members of
the Petitioners-association outside India, from persons who are non-residents of India and are from outside India.
The learned Counsel appearing on behalf of the Petitioners had also submitted that the above decision of the Division Bench of the High Court
of Bombay had been confirmed by the Supreme Court, in SLP (Civil) No. 18932 of 2009, by an order, dated 14.12.2009.
The said submissions made by the learned Counsel appearing on behalf of the Petitioners had not been refuted by the learned Counsels
appearing on behalf of the Respondents.
In such circumstances, the present writ petitions are disposed of holding that the Respondents are not entitled to levy service tax on the
Petitioners upto 17.4.2006, in respect of the services availed by them, as it is clear that Section 66A had been inserted in the Finance Act, 1994,
by way of an amendment, by the Finance Act, 2006, only with effect from 18.4.2006, enabling the authorities concerned to levy service tax on the
recipients of the taxable service.