Indian National Shipowners ... vs Union Of India
2008 Latest Caselaw 18 Bom

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          IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                
                                        
                          O.O.C.J.



                WRIT PETITION NO.1449 OF 2006




                                       
                             ...




                              
    Indian National Shipowners Association    ...Petitioner

            v/s.
                   
    1. Union of India

    2. Central Board of Excise and Customs
                  
    3. Superintendent (Preventive)

    4. Addl.Director

       Directorate General of Central
      


       Excise                              ...Respondents
   



                             ...





    Mr.J.J.Bhat, Sr.Counsel with Mr.Rohan Shah and

    Mr.Sushant Murthy i/b M.R.Baya for the Petitioners.

    Mr.R.B.Raghuvanshi, ASG with Mr.A.S.Rao for the





    Respondents.

                             ...




                                        ::: Downloaded on - 09/06/2013 14:08:25 :::
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                                      CORAM: D.K.DESHMUKH &




                                                    
                                              J.P.DEVADHAR, JJ.

DATED: 11TH DECEMBER, 2008

JUDGMENT: (PER D.K.DESHMUKH, J.)

1. By this Petition the Petitioners challenge the

constitutional validity of the following:-

(i) Section 66A of the Finance Act, 1994;

(hereinafter referred to as the "Act for the

sake of brevity), which has been introduced

with effect from 18th April, 2006;

(ii) An explanation to Section 65(105) of the

Act, which was in force between 16th June,

2005 and 17th April, 2006; and

(iii) Rule 2(1)(d)(iv) of the Service Tax

Rules, 1994 inserted with effect from 16th

August, 2002;

2. On the basis of the above provisions the

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Respondents are seeking to levy and recover service

tax from the persons resident in India on the

services which are rendered and/or performed out side

India by non-resident service providers. By the

aforementioned provisions although the services are

performed out side India, the tax is sought to be

levied and collected from the recipient of these

services, who is based in India.

3. The Petitioner No.1 is the Indian National Ship

Owners

Association which is registered as a

not-for-profit company under Section 25 of the

Companies Act, 1956, and whose members are owners of

Indian Flag Vessels. Currently, the Petitioner No.1

has 32 members with a combined gross registered

tonnage of 7.2 million tonnes, which represents 90%

of the total Indian tonnage. The Petitioner No.2 is

a National and Citizen of India and is a shareholder

of various companies which are members of Petitioner

No.1, inter alia, engaged in the operation of ships.

4. In the petition, though the Petitioners challenge

constitutional validity of Section 66A of the Act, at

the outset, the learned Counsel appearing for the

Petitioners stated that he does not press for the

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reliefs sought in relation to Section 66A of the Act.

    The    learned        Counsel submitted that from             1994      till




                                                                              
    2002    there      is    no demand of service          tax      from      the




                                                      
    members      of the Petitioners.        Demand for service                tax

    was         made        by     the         members            of          the

    Petitioners-Association            for the period from 1-3-2002




                                                     
    till 16-6-2005 and from 17-6-2005 till date.                       But the

    Petitioners        are    restricting their challenge to                  the




                                        
    demand      of    service    tax    from    the      members         of     the

    Petitioner        No.1-Association      till       18-4-2006            when

    Section      66A
                            
                          was incorporated in the Act.              In     other

words, the Petitioners by this petition now challenge

only levy of service tax from 1-3-2002 till 18-4-2006

when Section 66-A came into force.

5. The learned Counsel appearing for the Petitioners

submitted that though the service tax was introduced

for the first time in the Chapter V of the Finance

Act, 1994 in the year 1997 the definition of the term

"taxable service" was substantially amended.

According to the Petitioners, the Indian Shipping

Industry is obliged by Statute under the provisions

of the Merchant Shipping Act, 1958 and in terms of

the normal conditions of trade, to obtain and consume

outside India, the services listed hereunder.

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                a.          Customs House Agents Services




                                                                              
                b.          Steamer Agents Services
                c.          Clearing and Forwarding Agents
                            Services.




                                                      
                d.          Port Services
                e.          Cargo Handling Services
                f.          Storage and Warehouse Services
                g.          Maintenance or Repair Services
                h.          Technical Inspection and




                                                     
                            Certification Services.
                i.          Other Port Services
                j.          General Insurance Services
                k.          Manpower Recruitment and Supply
                            Agency's Services




                                         
                l.          Management Consultant's Services
                m.          Banking and other Financial Services
                n.          Business Auxiliary Services
                o.

                p.
                            
                            Technical Testing and Analysis
                            Services
                            Telegraph Services
                           
    6.     So    far as services rendered to the vessels                      and

    ships        belonging        to      the     members           of        the

    Petitioners-association             outside India are concerned,
      


    according        to    the   Petitioners     till      the      month       of
   



    February,        2002    there was no demand of           service         tax

made from the members of the Petitioners-association.

It is submitted by the Petitioners that the demand

was not probably made from the members of the

Petitioners-association, because as per the

provisions of Section 64 of the Act, the Chapter

extended to whole of India except the State of Jammu

& Kashmir, therefore, the services rendered outside

India was not to be taxed. The Petitioners pointed

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out that a question arose as to whether service tax

is leviable in relation to the services provided

outside Indian territorial water, and therefore, a

circular was issued by the Government of India dated

8-10-2001. That circular reads as under:-

Service Tax Circular No.36/4/2001 dated 8-10-2001

Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi

I am directed to say that question has arisen whether services provided outside the limits of the Indian territorial waters are liable

to Service Tax or not.

The matter has been examined. At present the levy of service tax extends to the whole of India except the State of Jammu and Kashmir. The expression "India" includes the

territorial waters of India. Indian territorial extend up to twelve nautical

miles from the Indian land mass. Chapter V of the Finance Act which governs the levy of Service Tax has not extended to the levy to designated areas in the Continental Shelf and the Exclusive Economic Zone of India (as has

been done in case of Central Excise vide Notification No.166/87-C.E., dated 11-6-87 and in case of Customs by Notification Nos.11/87-Cus., Dated 14-1-87 & 64/97-Cus., dated 1-12-97). It is, therefore, clarified that the services provided beyond the

territorial waters of India are not liable to Service Tax as provisions of Service tax have not been extended to such areas so far.

Thus, it was clarified by the aforesaid circular that

services provided beyond the territorial waters of

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India are not liable to service tax, as provisions of

service tax have not been extended to such area so

far. On 1st March,2002 a notification was issued by

which provisions of Chapter V of the Act were

extended to the continental shelf and exclusive

Economic Zone of India. The notification dated 1st

March, 2002 reads as under:-

Notification: 1/2002-ST dated 1-March-2002

In exercise of the powers conferred by clause

(a) of sub-section (6) of section 6, and clause (a) of sub-section (7) of section 7, of the Territorial Waters, Continental Shelf,

Exclusive Economic Zone, and other Maritime Zones Act, 1976 (80 of 1976), the Central Government hereby extends the provisions Chapter V of the Finance Act (32 of 1994) to the designated areas in the Continental Shelf and Exclusive Economic Zone of India as

declared by the Notifications of the Government of India in the Ministry of

External Affairs Nos. S.O. 429 (E) dated the 18th July 1986 and S.O.643 (E), dated 19th September, 1996 with immediate effect.

It is after issuance of this notification that for

the first time demand of service tax was made from

the members of the Petitioners-association in

relation to the services received by them outside

India even beyond the continental shelf and exclusive

economic zone. Thus, so far as that period is

concerned, the learned Counsel appearing for the

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Petitioners submitted that the services are rendered

to vessels and ships of the members of the

Petitioners-association beyond even continental shelf

and exclusive economic zone. The learned Counsel

further submitted that on 31-12-2004 a notification

was issued by the Government of India in exercise of

its power under sub-section 2 of Section 68 of the

Act, and therefore, the demand of service tax was

made from the members of the Petitioners-association

in relation to the services received by them to their

vessels and

ships outside of India on the basis of

the notification dated 31-12-2004 from 1-1-2005.

Notification dated 31-12-2004 reads as under.

Notification:36/2004-S.T. dated 31-Dec-2004

"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 purposes of the said

sub-section, namely:-

(A) the services:-

(i) in relation to a telephone connection or pager or a communication through telegraph or

telex or a facsimile communication or a leased circuit;

(ii) in relation to general insurance business;

(iii) in relation to insurance auxiliary

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service by an insurance agent; and

(iv) in relation to transport of goods by

road in a goods carriage, where the consignor or consignee of goods is,-

(a) any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b) any company established by or under the Companies Act, 1956 (1 of 1956);

(c) any corporation established by or under the law;

(d) any society registered under the

Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

(e) any co-operative society established or under any law;

by

(f) any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or

(g) any body corporate established, or a partnership firm registered, by or under any

law;

(B) any taxable service provided by a person who is a non-resident or is from outside India, does not have any office in India.

2. This notification shall come into force

on the first day of January, 2005.

7. The learned Counsel submitted that reading of

sub-section 2 of Section 68 and this notification

along with the scheme of the Act shows that under

this notification the recipients of service cannot be

made liable for levy of service tax. The learned

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Counsel further submitted that on 16-6-2000 the

Service Tax Rules 1994 were amended and a provision

was added in Rule (2), which reads as under:-

(iv) in relation to any taxable service provided or to be provided by a person, who has established a business or has a fixed

establishment 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 such service provider does not have any

office in India, the person who receives such service and has his place of business, fixed establishment, permanent address or, as the

case may be, usual place of residence, in India.

By this provision while defining the term "person

liable to pay service tax" a person who has received

services outside India was made liable for levy of

service tax. The learned Counsel submits that

provision of Rule 2(d)(iv) quoted above is invalid,

because it is contrary to the scheme of the Act. On

16-6-2005, an amendment was made to the Act also, by

which an explanation was added below Section 65(105).

Which explanation reads as under:-

Explanation- For the removal of doubts, it is hereby declared that where any service provided or to be provided by a person, who has established a business or has a fixed establishment from which the service is provided or to be provided, or has his permanent address or usual place of

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residence, in a country other than India and such service is received or to be received by a person who has his place of business, fixed

establishment, permanent address or, as the case may be, usual place of residence, in India, such service shall be deemed to be

taxable service for the purposes of this clause.

8. The learned Counsel submits that by this

explanation services provided by a person who does

not have permanent residence in India to a person

having present permanent residence in India is deemed

to be taxable service. But by this explanation levy

of

not provided for.

service tax from the recipients of the service

The learned Counsel submits that is

thus the levy of service tax from the members of the

Petitioners-Association with effect from 16-6-2005

was on the basis of the explanation and the provision

of Rule 2(1)(d)(iv) quoted above. The learned

Counsel submits that the provisions of Rule

2(1)(d)(iv) are invalid and under the explanation

service tax cannot be levied from the members of the

Petitioners-association, who have received services

to their vessels and ships outside India. With

effect from 18-4-2006 Section 66-A was added to the

Act. Which reads as under:-

"(1) 66A (1) Where any service specified

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in clause (105) of section 65 is, -

(a) provided or to be provided by a

person who has established a business or has a fixed establishment 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 service, and such taxable service shall be treated as if the recipient had himself provided the service in

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 in 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 through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent

establishments shall be treated as separate persons for the purposes of this section.

Explanation 1.- A person carrying on a business through a branch or agency in any country shall be treated as having a business establishment in that country.

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Explanation 2.- Usual place of residence, in relation to a body corporate, means the place

where it is incorporated or otherwise legally constituted."

9. The learned Counsel submits that it is only from

18-4-2006 that a substitute provision was made for

levy of service tax from a person who receives

service outside India. Thus, according to the

learned Counsel, before 18-4-2006 no service tax

could have been levied on the members of the

Petitioners-association whose vessels and ships

receive service

outside India. Though the learned

Counsel appearing for the Petitioners submitted that

service tax is sought to be levied from the members

of the Petitioners-association from 1-3-2002, in the

written submission filed on behalf of the Respondents

there does not appear to be any justification given

for levying service tax from the members of the

Petitioners-association whose vessels and ships

receive services outside India.

10. In the written submission filed on behalf of the

Respondents reliance is placed on the provisions of

Rule 2(1)(d)(iv) of the Rules, which have come into

force from 16-8-2002 to claim that in view of those

Rules service tax was leviable. It was submitted

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that it is unambiguously clear that a statutory

effect had already been created w.e.f. 16-8-2002, by

an omnibus provision made by incorporating clause

(iv) in Rule 2(1)(d) of the Service Tax Rules under

which every service receiver in India became liable

to pay Service Tax in relation any taxable service

provided by non-resident, who did not have office in

India. This statutory effect has to be read

harmoniously as if complementing the provisions of

Section 68(2) as it existed prior to issue of

Notification 36/2004-ST, dated 31-12-2004 rather than

negating its existence or challenging its vires since

the date of its incorporation, i.e. 1-8-2002. The

statutory effect created vide rule 2(1)(d)(iv) cannot

be reduced by reference to a subsequently issued

notification repeating the contents of the said rule.

It was further submitted that in respect of the

recipient of services who have been made liable to

pay service tax on services received from foreign

based persons, there is no denying the fact that the

recipients of these services are the ultimate

beneficiaries of the services rendered to them.

Moreover, in the case of an indirect tax, it is the

recipient of service who has to ultimately bear the

incidence of a tax. Thus, the liability cast upon

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the recipient of service has a direct connection with

him and there exists a direct nexus between recipient

of these services from foreign based service provider

and the Indian Union.

11. The learned Counsel appearing for both sides

relied on the judgment of the Supreme Court in the

case of Laghu Udyog Bharati v/s. Union of India,

1999 (112) E.L.T. 365 (S.C.) and the judgment of the

Supreme

Court in the case of Gujarat Ambuja Cements

(S.C.). The Petitioners in this petition are

challenging levy of service tax from the members of

the Petitioners-association in relation to the

services rendered to the vessels and ships owned by

the members of the Petitioners-association outside

India from 1-3-2002 to 17-4-2006.

12. Article 265 of the Constitution of India lays

down that "no tax shall be levied or collected except

by authority of law". Therefore, an enquiry that is

to be made is whether during the period from 1-3-2002

to 17-4-2006 there was valid law which authorises

levy of service tax in relation to the services

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rendered outside India.

13. Service tax was introduced for the first time

under Chapter V of Finance Act 1994. Section 66 of

the Act was the charging section and provided for a

levy of service tax at the rate of 5% of the value of

the taxable service provided to any person by the

persons responsible for collecting the service tax.

In other words, the levy was on the provider of the

taxable service. "Taxable service" is defined in

Section

65 to include only three services namely any

service provided to an investor by a stock-borker, to

a subscriber by the telegraph authority and to a

policy holder by an insurer carrying on general

insurance business. Section 68 requires every person

providing the taxable service to collect the service

tax at the specified rate. Section 69 of the Finance

Act 1994 provided for the registration of a person

responsible for collecting service tax. Sub-section

2 of Section 5 indicated that it was provider of the

service who was responsible for collecting the tax

and oblige to get registered. Thus, sections 65, 66,

68 and 69 are pertinent to the present issue. They

were subsequently amended. The remaining sections of

the 1994 Act substantially continued as originally

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enacted with minor changes. Under Section 70 of the

Finance Act, 1994 every person responsible for

collecting service tax must furnish to the Central

Excise Officer in the prescribed form and verified in

the prescribed manner a clear return. Sections 71,

72, 73 and 74 deal with the filing of the returns,

provision for assessment, reopening of assessment and

rectification of mistake in assessment order.

                                           
    Section      75    provides for payment of interest at                     the

    rate    of one and one and half per cent for the                        every

    month    or    part
                            
                             of    a   month    by    which      the      person

    responsible        for    collecting       service tax         delays        in
                           
    paying      tax to the credit of the Central                 Government.

    Section      76    deals with exemption of the penalty                     for

    failure to collect the service tax.                 Section 77 deals
      


    with     the      penalty      for     failure     to    furnish           the
   



    prescribed return.            Section 78 deals with the penalty

    for    suppression        the value of the         taxable        service.





    Section      79 deals with penalty for failure to                     comply

    with    notice.         Section      94 of the Act       empowers          the

Central Government to make rules for carrying out the

provisions for Chapter V of the Act. Pursuant to

such powers the Service Tax Rules 1994 were framed.

14. In this petition we are concerned with the

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provisions of Section 65(105), which defines the

taxable service. By that provision a service

provided to a ship or vessel was defined to be

taxable service.

15. The charge of service tax in respect of service

rendered to a ship or vessel remains on the person

responsible for collecting the service tax under

Section 66 of the Act. Section 66 reads as under:-

"66. There ig shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent of the value

of taxable services referred to in sub-clause

(a), (d), (e), (g), (h), (i), (k), (l), (m),

(n), (o), (p), (q), (r), (s), (t), (u), (v), (w), (y), (z), (za), (zb), (zc),(zd), (zi), (zj), (zk), (zl), (zm), (zn), (zo), (zq), (zr), (zs), (zf), (zu), (zv), (zw), (zx),

(zy), (zz), (zza), (zzb), (zzc), (zzd), (zze), (zzf), (zzg), (zzh), (zzi), (zzk),

(zzl), (zzm), (zzn), (zzo), (zzp), (zzq), (zzr), (zzs), (zzt), (zzu), (zzv), (zzw), (zzx), (zzy), (zzz), (zzza), (zzzb), (zzzc), (zzzd), (zzze), (zzzf), (zzzg), (zzzh), (zzzi), (zzzj), (zzzk), (zzzl), (zzzm),

(zzzn), (zzzo), (zzzp), (zzzq), (zzzr), (zzzs), (zzzt), (zzzu), (zzzv), (zzzw), (zzzx), (zzzy), (zzzz), (zzzzb), (zzzzc), (zzzzd), (zzzze), (zzzzf), (zzzzg), (zzzzh), (zzzzi) and (zzzzj) of clause (105) of Section 65 and collected in the manner as may

be prescribed."

Thus, the service tax can be levied at the rate of

12% of the value of the taxable service. Then comes

Section 68, which lays down that every person

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providing taxable service to any person shall collect

the service tax at the rate specified in section 66.

It is clear from reading of these provisions that

according to scheme of the Finance Act, as it existed

before 18-4-2006, the charge of service tax is on the

person who is responsible for collecting the service

tax. It is by virtue of the provisions of Section 65

the person who provides the service is regarded as

the assessee.

16.

Now, so far as the notification dated 1st March,

2002 quoted above which is relied on for justifying

levy of service tax from 1-3-2002 is concerned,

perusal of that notification shows that by that

notification service which is rendered or provided in

the Continental Shelf Exclusive Economic Zone and

Territorial Waters of India has been made taxable.

That notification does not have the effect of levying

service tax on the recipients of the service.

Therefore, levy of service tax on the members of the

Petitioners-association on the basis of notification

dated 1st March, 2002 is plainly without authority of

law.

17. Reliance is placed on the provisions of Rule

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2(1)(d)(iv) quoted above for justifying the levy of

service tax for the period from 16-8-2002. Perusal

of the above quoted Rule 2(d)(iv) shows that by that

provision a person liable for paying the service tax

was defined to mean in relation to any taxable

service provided by a person who is non-resident or

is from outside India to a person receiving taxable

service in India. Apart from the fact that this rule

is contrary to the provisions of Section 68 and other

provisions of the Act, under this provision the

recipient of the service became liable for paying the

service tax provided the service was received in

India. The entire case of the Petitioners is in

relation to the service received by the vessels and

ships owned by the members of the

Petitioner-association outside India. Therefore, it

cannot be said that on the basis of Rule 2(1)(d)(iv),

service tax can be levied on the members of the

Petitioners-association. It is further to be seen

here that Section 64 gives powers to the Central

Government to make rules for carrying out the

provisions of the Chapter. The chapter relates to

taxing the services which are provided, the taxing on

the value of the service and it is only the person

who is providing the service can be regarded as an

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assessee. The rules therefore, cannot be so framed

as not to carry the purpose of the Chapter and cannot

be conflicted with the provisions in Chapter V of the

Act. In other words, as the Act makes the person who

is providing the service liable, the provisions in

the Rules cannot be made which makes the recipient of

the service liable. It is, thus, clear that the

provisions of Rule 2(1)(d)(iv) are clearly invalid.

18. So far as reliance placed on the notification

dated

31-12-2004 for justifying levy of service tax

from the members of the Petitioners-association is

concerned, that notification has been issued under

sub-section (2) of Section 68 of the Act.

Sub-section 2 of Section 68 reads as under:-

68(2) Notwithstanding anything contained in sub-section (1), in respectof 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.

The above provision authorises the Central Government

to notify the taxable service, in relation to which

the rules can be framed, in relation to such service.

- 22 -

By the notification dated 31-12-2004, any taxable

service provided by a person who is a non-resident or

is from outside India is notified. If Rule 2(d)(iv)

is taken to be rule framed pursuant to this

provision, then a person who receives taxable service

in India from a person who is non-resident or is from

outside India becomes taxable and not service

rendered outside India by a person who is

non-resident or is from outside India. Therefore,

levy of service tax from the members of the

Petitioners-association ig from 1-2-2005 cannot be

justified.

19. Then reliance is placed on explanation which is

added below Section 65(105). That explanation was

added by Finance Act, 2005 with effect from

16-6-2005. That explanation reads as under:-

Explanation- For the removal of doubts, it is

hereby declared that where any service provided or to be provided by a person, who has established a business or has a fixed establishment 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 such service is received or to be received by a person who has his place of business, fixed establishment, permanent address or, as the case may be, usual place of residence, in India, such service shall be deemed to be taxable service for the purposes of this

- 23 -

clause.

By this explanation services provided by a

non-resident outside India to a person residing in

India has been declared to be taxable service.

Therefore, though the services provided to the

members of the Petitioners-Association outside India

becomes taxable service, the charge of the tax

continues to be on the provider of service as per the

scheme of the Act, and because of the explanation

also the Respondents do not get authority of law to

levy a service ig tax in relation to the services

rendered to the vessels and ships of the members of

the Petitioners-association outside India.

20. 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

- 24 -

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 otherwords, 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

- 25 -

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.

21. 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 ig and ships of the members of the

Petitioners-association outside India, from persons

who are non-residents of India and are from outside

India.

22. Rule made absolute accordingly. No order as to

costs.

(D.K.DESHMUKH, J.)

(J.P.DEVADHAR, J.)