The Supreme Court has dismissed the Centre’s plea challenging the Bombay High Court ruling that restrained it from levying service tax from Indian National Shipowners Association for services received abroad between March 2002 and April 2006. The high court had held that services received by vessels and ships outside India prior to April 18, 2006, from persons who are not residents of India or are outside India cannot be taxed.
A Bench headed by Justice SH Kapadia dismissed the Centre’s plea that challenged the high court verdict that held as unsustainable the levy of service tax on a person who is resident of India but receives services from outside India prior to insertion of Section 66A in the Finance Act, 1994.
It had earlier issued notice to the Indian National Shipowners Association, the apex body of shipping lines, Central Board of Excise and Customs and others on the levy of service tax.
In view of Section 66A, offshore services cannot be subjected to service tax prior to April 18, 2006, the high court said, adding that before enactment of Section 66A, there was no authority vested by law in the revenue to levy service tax on a person who was resident in India and received services outside India.
According to the petition, the high court was not right in holding that there was no authority vested by law to levy service tax from a resident Indian who has received services outside India before the enactment of Section 66A.
Opposing the Centre’s plea, the association in its reply filed through counsel Tarun Gulati said that the taxable event under the provisions of the Finance Act was the rendering of the service, and if the taxable event occurred outside the territories to which the Act applied, no service tax can be levied.
“If the provisions of the Act do not authorise levy of a tax, such tax cannot be collected merely by the prescription of a provision providing for collection of the tax. A tax which is not leviable under the charging provision is unauthorised, illegal and liable to be struck down,” it added.
