The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that the recipient in India is liable to service tax for the service received from abroad only from 18.4.2006 after enactment of Section 66A of Finance Act, 1994.
The appellant M/s. TKM Global Logistics Limited challenged the Order-in-Original No. passed by the Commissioner of Service Tax, wherein the Commissioner has confirmed the demand for service tax of Rs. 22,25,87,789/- along with interest.
The Appellant enters into a contract with its clients to render services about the import of goods from abroad. Since the Appellant has no physical presence abroad, for the performance of the overseas part of the above-mentioned services, it has entered into contracts with various Overseas Logistics Service Providers (OLSPs). In terms of the said agreement, the OLSPs raise invoices on Appellants for handling the overseas part of the operations.
A Show Cause Notice dated 21.10.2010 was issued to the Appellant demanding service tax of Rs. 22,25,87,789/- along with the proposal to demand interest under Section 75 and penalty under Sections 76, 77 and 78 of the Finance Act, 1994 for the period April 2005 to March 2010. The notice was adjudicated by the Commissioner of Service Tax vide the impugned order, wherein the demands raised in the Notice are confirmed along with interest and penalty.
The Appellant enters into a contract with its clients to render services about the import of goods from abroad. Since the Appellant has no physical presence abroad, they have entered into contracts with various OLSPs for the performance of the activities abroad. The Appellant has not paid service tax on the part of the services rendered abroad by the OLSPs. The Department demanded service tax on these activities under the category of ‘Business Auxiliary Services’ and confirmed the demand for service tax of Rs. 22,25,87,789/- along with interest and penalty.
The Bombay High Court in Indian National Ship Owners Assn. vs. Union of India, 2009 has held that the recipient in India is liable to service tax for the service received from abroad only from 18.4.2006 after enactment of Section 66A of Finance Act, 1994.
A two-member bench of Shri Ashok Jindal, Member (Judicial) and Shri K Anpazhakan, Member (Technical) held that the demand of service tax of Rs. 2,11,90,438/- for the period April 2005 to 18.04.2006 i.e., before insertion of Section 66A of the Finance Act, 1994 is not sustainable.
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