Delhi High Court
S.R.Batliboi & Co. vs U.O.I & Ors on 24 May, 2010
Author: Badar Durrez Ahmed
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 24.05.2010
+ WP(C) 9041/2007
S.R.BATLIBOI & ASSOCIATES ... Petitioner
- versus -
U.O.I & ORS ... Respondents
AND
+ WP(C) 9065/2007
S.R.BATLIBOI & CO. ... Petitioner
- versus -
U.O.I & ORS ... Respondents
AND
+ WP(C) 9068/2007 & WP(C) 9071/2007
ERNST & YOUNG (P) LTD ... Petitioner
- versus -
U.O.I & ORS ... Respondents
Advocates who appeared in this case:-
For the Petitioner : Mr N. Venkataraman, Sr Advocate with Mr Achin Goel
and Mr R. Satish Kumar
For the Respondent Nos. 2 -3 : Mr Mukesh Anand with Mr Shailesh Tiwari and
Mr Sumit Batra
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V.K. JAIN
1. Whether Reporters of local papers may be allowed to
see the judgment ?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported in Digest ?
WP(C) Nos. 9041/2007, 9065/2007, 9068/2007 & 9071/2007 Page No.1 of 5
BADAR DURREZ AHMED, J (ORAL)
1. These writ petitions are taken up for disposal together because
they raise common issues.
2. The petitioners urged that prior to 18.04.2006, that is, the date on
which Section 66A was introduced in the Finance Act, 1994, cross-border
services provided by a foreign service provider could not be taxed at the
hands of resident recipients, such as the petitioners. However, after
18.04.2006, by virtue of the introduction of Section 66A, if any service
specified in Section 65(105) of the Finance Act, 1994, is 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 by a person, who has his place of
business, fixed establishment, permanent address or usual place of residence
in India, then, such service shall, for the purposes of the said 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 Chapter V would apply.
3. In the present writ petitions, the services provided by the foreign
service provider were in the nature of management consultancy services
falling under Section 65(105)(r) of the Finance Act, 1994. Although the
period covered in these writ petitions spill over 18.04.2006, the learned
counsel appearing on behalf of the petitioners made a categorical statement
WP(C) Nos. 9041/2007, 9065/2007, 9068/2007 & 9071/2007 Page No.2 of 5
that these writ petitions are confined only to the period prior to 18.04.2006.
Insofar as the period beginning 18.04.2006 is concerned, the learned
counsel makes a statement at the Bar that the petitioners have remitted the
service tax on the basis of the provisions of Section 66A of the Finance Act,
1994.
4. Now, coming to the issue at hand, we find that the same is no
longer a debatable issue inasmuch as this Court in the case of Unitech
Limited v. Commissioner of Service Tax, Delhi: 2009 (15) STR 385 (Del),
following the decision of the Bombay High Court in the case of Indian
National Shipowners Association v. Union of India (UOI): 2009 (13)
S.T.R. 235 (Bom.), held that the provisions of Section 66A would be
applicable only from 18.04.2006 and that prior to that date, services
rendered by a non-resident service provider to a resident recipient could not
be taxed as a service at the hands of the resident recipient.
5. In fact, the Bombay High Court in Indian National Shipowners
Association (supra) has more than adequately dealt with the entire issue.
The concluding observations of the Bombay High Court are as under:-
"... It appears that it is the 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
WP(C) Nos. 9041/2007, 9065/2007, 9068/2007 & 9071/2007 Page No.3 of 5
66A was enacted a person liable was the one who rendered
the services. In other words, it is only after enactment of
Section 66A 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 66A, 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 and ships of the members
of the Petitioners-association outside India, from persons
who are non-residents of India and are from outside India."
We are also informed that a Special Leave Petition was also preferred
before the Supreme Court by the Union of India against the said decision of
the Bombay High Court. However, the Supreme Court dismissed the said
petition by virtue of its order dated 14.12.2009 in Civil Appeal
No. 18932/2009.
6. The learned counsel for the petitioners also placed reliance on a
decision of the High Court of Punjab and Haryana in the case of
Commissioner of Central Excise Commissionerate, Ludhiana v. Bhandari
Hosiery Exports Ltd: 2010-TIOL-103-HC-P&H-ST. The said decision, in
turn, placed reliance on the decision of the Bombay High Court in the case
of Indian National Shipowners Association (supra) as well as on the
decision of this Court in Unitech Limited (supra).
7. As pointed out above, the issue stands covered by the decision of
this Court in the case of Unitech Limited (supra). Consequently, the
WP(C) Nos. 9041/2007, 9065/2007, 9068/2007 & 9071/2007 Page No.4 of 5
impugned show cause notices issued by the Commissioner of Service Tax,
Delhi (the respondent No. 2 herein), to the extent they pertain to the period
prior to 18.04.2006 and relate to the service in question, stand quashed.
The writ petitions stand allowed to the aforesaid extent. There
shall be no order as to costs.
BADAR DURREZ AHMED, J
V.K. JAIN, J
May 24, 2010
SR
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