Karnataka High Court
The Commissioner Of Central Excise And ... vs M/S. Micro Labs Ltd on 27 January, 2011
Bench: N.Kumar, Ravi Malimath
IN THE HIGH COURT SF KARNATAKA AT _ mcras THIS THE 2??" my 0F 3A:$4L;«,rx Rfj:*.V 1 " .
THE HONBLE M::<,4__:1us'T'=1:_f'E f\i.i<'.;"§'§?3;£VV\A:.F§_V_:.V V . _ 'V THE HON'B¥,;E%_:%"f'§.E12.}.§;}é§"'EC#EV__§%}5\\;fI'MA£¥£E\'€2%TH BETWEEEE; 5lf ,..';. ' % The Co%rnmE'ssiofi%3;r-of'{Q6-ntz'af"E':e<'{fise & S.T., Large Ta><pAa?;z_eréVUnEt,q_ _ _' J.S.S';--.To'wer*s, 'BéV~n%4ash%an;;a:_i 1:: Stage, 100 F~"ee_t Ring' Road--, _ "
BangaEore.._V-- 560-08.3. WAPPELLANT Sr__i'Jeevé{§"'3'_.f?§.e.e:*aigi, Advocate) Wis. M_i.:.:r";3 aébs Ltd.
2?, Rate Course Road, x Banga.i.0're «~ 559 052" WRESWNDENT "(-B\;?.Sri 3<lS.Ravi Shankar, Adwcatej "€h§s €EA fsieé under seazzésn 3543 of {fig Ceniraé E:=€CE§€ fiat, §§»<%4 aragséfig fie decéaé {fie ;§L$bS§§f"'§i%5§ aziesézéqrz éé ' "~3- beionging ta the aseeesee during the period__.frerifi' tci 31-3~2006. For receiving s»:;g:h serx2'iCes.::tine"-avé;£7e:::see»_ was Qaying rernazneratian in 'C¥"3{3'-.f(T}2':'{'i'Ei bf cie.;"n"n"fi'i's$'i'e:fi-..téfiithe agents outside India. Corr:-missViori;'V:ésiigigentes/"servic.ei' providers were non~residen_i:§""n:r 0_iits'iiie~:{n.§r;iie_V5or did net have offices in India;;4.._zV:Tiie'irefgr'e"affeii€>vs;'cauge notice was issued caiiirig Aupon the service YEW iiabifii"-'Y1: was claimed as total In addition education jclaémed and they were aiso Caii€€f'A'LE._[;i(4)'i1 to to why penalty shoziicf not be imgssed. V~-7i"i'Vie"as?.-:ese"ee ccmtenfied tiiafr. the service .pV'r'ovi&i'ér§xi'a.re provifiing service abroad. Hence the service :'p_ir0V\«2i:i:er§'diifi-not attract ievy of service tax and they have ne.__in:e:r:t.iVe'~n to evade service tax in as much as they were AA uTnder°v..ti1e bonafide beiief that they were not iiabie to pay ':3-eriéice tax for the afaresaéd reasgns. They" Games} the _.§ia§":ii§ty ta my tax, ieterest ané pezzaiiyz 1 .....g§_..
3. The assessing authority on a consideration of the aforesaid representation iieid that it is not in dispute that the essessee is a receiver of taxable serviee'*'frLe{i*iv.,. abroad, The assessee had agreements witfff'ofv.eVraeas'_''V "
commission agents who arovided ti}-e"'ser.\;ic:e of.d'isfrib'ut_ijon'i'.. of oharmaceuticais beioriging to aforesaid service orovided Vi .oveVrs'eaVs~.T'agent, commission was paid bythe aeiaes.s_ee§"»?§he.aissessee was a recipient of service hat the service providers had .p4ro»'.i_ded::"ti§§_=' not iegaiiy tenable. The"s:e.ryi:ee';V--j.§J°as:_VreCVeii/ed::fe;r_tnesassessee in India and he 3 service providers in the present Case-are-- a'd:'m---i't"te,d'ii.;z non--resident/from outside India4;fantii.do nothave any office in india. in such a case seryjiiiice iiiabiiity is fastened on the recipient of service fi.?¢$Ci'i5'&d igseiduer Ruie 2(1)(d)(iv} of Service Tax Rules, 199% T§.:é'erei'ore, they fastened the iiabiiity to pay the .ae.rvii_;::e "tax on the assessee for the period eariier to
- I~%*f.¥_.vV-w~'3==~':2'iGQ6i They aiso imeosed interesi and penaity, 1 »~,=r"/I/t Aggrieved by the gait} Clfdet' the assesgee ereferree an eppeaé to the Tribeeai. ":'he Tribunal reiying Judgment 0? the High Ceurt of Bombay in the ceée' _ Natiehai Ship {3Wf'i€%'S Assecietéoeflmvs. L3-:*:é'evrti:~.ef"~.::Ihdia,L:ht reperted in 2009 (13) S.T.R. 23=E§(e;;.q21.fj3'UfS3'I'§E_fir.§f ma. ve. csr, sew: reperted>'§e__.2OQt5rTIOL. 1.316; Belhi, heid that the service ta>tV:4'E:i'aV't§'iEE.ty e'h"t'he:V':reeifg3éent of the service wouid arise anti therefere he set aside the order authority.
Aggrieved eptyieai.
._ appearing for the revenue submitterfi of payment of service of :a;:¢'s en the s,eVrviCe'providers and the service providers 'Var-e',Vedrh'rtte_tiEy_'situated outside indie and are not resident E'r:_"ir_r_Vc11ie';::~.:"' eat liebée to eay eervice tax. But by A _ r«rots%r:cat».g'§:r;-r€o.3ez20e4 gr dated 315* December, 2084, by .e,'Vf~z'iArt13__e otthe power conferred by sub--Se<:t:i0n(2) of Section 'tfihhthe Act the Ceetref Government has eetéfied the tax 4 L/' ..5,.
eervices for the purpeses ef i:ess.: end aise who has pay the seie tax. It is specificaliy stated that any taxabie se_iix§i<:e eiovided by a person who is riei; a resident or outside India, dees not have any office in Indi.e;"
iecipient of the eervice in India ie.<l>ieb.le 2 effect frem January, 2005. T:i':ereio"ke 'lithe contends that the Judgment has no application when sisestaaitiai----«,:iVe'ii.zer--~..iAe cerife.i,iedl§ on the Centrai Government is not oriiy specifying the'V$e:r::_i_ce$:_'iiitiietithat also the person who is E"i"a__bi;e.. 'D:a§,i.e__t'e.e t'ax:§_' H » 5; F§e'i5g:e_ntra, -igheieariied counsel appearing for the assessee_reiyingi'--€>'n'-.i__ttie"' aforesaid Judgment of the BOi"{ib:£3'f L}-figii i§:'f£>'u~tt eontended that the liabliity to pay fl$eerV\}ii:e ta}: cfiifitltie reeiueierit of the service was imposed for i:.hVe.._fiur§t..Iti-iéfievtlbfiamending the Act and introducing Sectian tax tevzaiieiczi by the fierrieay iiigii Court eihicii has been 66¥;3i.4.__ Tvi.!-i~saii4ji;;h time there was no liability on the recipient E 2?:
L;-/' ./"' Coafirmed by the Apex Court' Secticm 68(2) diai mt empewer the Centrat Government by wecifyizag the_4.9§r.s:{)~:1 who is léabie is pay tax and even they have spetfiéd . Netificatiori that it is one without jurs3Aqictéon.~as'V;§%;§zVd a:h::, '~ 2 Bombay High Court. He therefore :=.r§ubmi1;é; th_e:§i:..£"hé"é}*d_e'r=::;_A& passed by the Trébunat based»r'c;r1. thé'afé::*es;.:ai§ '};;.ri.Qrr1émt carmet be feund faasft with.
6. There-fc_+re the...ar§sgaA¢er. Vtj'V{.i.',e::i'§tE{>n revolves round the inE§r_§§ré:£a§iu{3::'*to€héé P:¥ a€V§é'ci"cm"'Sectéon 66~A as weft as seem;~;;5s;(2)L%%'o§<.V£rr%e Acrt. Sé:'Ction 68 of the AC1:
reads a§<.V:.:nder;V4'-".V~~.._ ' > _ ._ "$89 Coiiecisigjh.:_Lja:.nd'--~réc-zwery ef s,er\.»'.ice tax:--
(1) :~:tQ{:$<g~br<51<e'r , the teiegraph authority or t:ih_§e "in*3urerV'wh.o is grovidmg taxabie services to any ééagli c:o£"I'é&r:t the service tax at the rate Vs 'E"n._ Sggcti G n 66.
A{2}_."%"hé4i'..*Sérvice tax ceiiecteé during any calendar m0r§t"%"':';. fir: acmrdance with thé groxségiorwg sf sat?' %//,.. .... --
.... 8 _ 3e«::i:ii3n(:} shaii be paid to the Credit of the Centrai Government by the 13"' cf the menth émmediateiy f0U{3Wi¥'§g %;h@ said Caiehdar mdrith. (3) Any perscm, mspdnsibie for coiiec2:i..h~g'4'_A'i:lfi"§§".j'dd"
service tax, who faiis to coiled: the=:"i.':_:"t23,>_<ii.V:iii"
accordance wiiih the previsiong..i.n__$ub_»ééCti*dij:
shali notwithstanding such faii:d_vre,:-.b«g-zfiv "Edda-y__ the tax to the CE'€di'EI of the Ceht-.ra"i'..GQverrirhén"t in accordance with the provisi'9;i';*§._%Qf sdbrrsectii:§nVV":jj2'V)"."*' S From a perusal of the ;EifF"OFES?Ei,i,f:..5.5'ECiI§£f}f1 Etflis-.,Cié?33§i" from sL:b~SeCti<:m(1) ef Sectiofa' 'U7_1_a§";'£V':iE':'\a';éi;7Vji=,ii3fEFT'SOE'1 providing taxable service isjliabie ?ct§Wi:5a1.,{ Ea:-5,' Hawever, sub» Sectiorzfiz) hiaiEi'<;:_:es_«VT€it< ~4Véi:§; cigar that notwithstanding anything"Cdr§tain'es:ié'ii-h'«é'_iJb:?£-3;é't:tien (1) in respect of any izaxabic sservide .;3rc,rv§'de.rfi the Centrai Gdvernment in the GffiVci'i'ai:. (§'a:<e'itg3 tiiegéivice tax thereon shaii be paid by 'VA""'S1;3VC;73V§3E';i;;*§.Qi'I 'i"§3V.:~'SUCh manner" and the same may be presécif:ihev_d~gigfdtdhe {ate specified in Section 66 and ail K"--._Vi3*%'f{>visid'ri.gAé:'9f this Chapter shah appiy to such gerson ag if A Tx'he*is_ tjfi-'ye person iiable fair paying the service tax in reiaticm fig...
ts such service. Therefere, the aforesaid p;'O'v'ESieZ'm aetherises the Central Gevernment to issue a fiéotifica-t_i0n and ereseribe a eerscm whe is liable to pay tax the manner in which the tax is ta be eaie. As "
wards of SLib"S8CtiOi"i(Z) starts wit§ii""'n-mi:--«o5§3st:_e'fi'te'4 ei'ei.:iseVi'»., even theugh under Section 68(1) th.'é:iVsei§$:Eee by the person who provides {he Centraf Gevernrraerit by,éssuirig-----e1.'"§i.et%.fAi_<:afsicin'under sub- Sectioniz) to specify thet the service provider is aisou §ie'b.!_e Vtviiiis context the Netification 2094 has been »»s'cié'_§iLi--i_a*;ir§g the services which are liable for iseriviéce"'éa>&".enei'""'--ifi else makes it clear that any _ taxapigje"service"i3.rf_{jir'ideé by a person who is not a resident cj'r'~i.s"?r0'%ri' sézétsvide India who is not having any office in £'ii.dE'e_, V. "Tii'e.,_sa§§d"'Circuiar is set out hereunderzm A. "Se'r;.2%ce tax payment: in reietion its specifies ""'---"(£'~.}__'t')f':ifi{:"ei:ion No.36/2004~S.T., dated 3}m12-2{}04)" 2
i !'i.
.», * services: 59%/"
M19...
in exercise of the pcswers confenred by suE:,1-5e<:t:Eor": (2) 9'? section 68 91' the Finance'. Act, 1994 (32 ef 1994), the cen_z:r+g ':.%':%%j%'%{{ - Gevemment éwereby notifies the §OEf€;":.A:.?i£'}Vg "
taxabie services for the purpgpgeg of'.t'i*i"e' "
subwsection, namefyr (A) the sen/i<:es,~ (E) En reiatjon to 3 .té'i<..=V;3hc)r'§'L-:.__c:<3:f1riz:2;:t'E'<jfi"' er pager or a cenj:rV'r'2:,.V2;**:.'~r,;*._Vati::>':'2' telegraph t'élej_>{ facsiffiiie cerz§munica'tVE€3_h E'€ea__s;éd.AA_';:Efc_g:it;
{ii} in 4_:"reiat:i§2'%:' .:'g§:§n.§3:'é§E Ehsurarice
(iii) _ infV,ré{at1o{é'55T.'j;:§: msL;ra'nce auxiiiary V' """ H agent; and * 4' inréEVa§%%os244'%"tT(§ éfahrwsport of goods by road" §%é' a»- carriage, where the 'c:5;ansig'nor'or cansignee or geeds Es, ~» any fa{ft:O't'y"%egistered under or governed Vb'y. E'ne_ Facteries Act, 1948 (53 of 1948); :"'fa..r}__y»'§:<§%219aray estabéished by er under the ~~CL:,i:'*:'épa:':ies Act, 1956 (1 of 1955);, (c:}{ t.any Corporation established by or under any §aw; ii ,.» ~~~~~ ¥:/ ._ 11 ..
(if) any satiety registered under the $9£ieties Registratian Arc; 186G{23'. Q?' _ £868} 0;' £3-fidfif' any Eaw C{:i¥"¥'€Sf3Gi"i§ii"'i§ tr; V that Act in farce ii'? any gart G? India; {8} any C5-eperative scsciety estabiishefii er under any faw; _ _ .
(f) any deaier of exaisabtég registered "under the Cé§1t_ré'i.V_fExc§ég'v_%':%%i:':,'~ n < 1944 (1 of :94-4) o{'the r;;iesj_ r~.r~a§i<;i-:3 ':;.r.§é* thereunder; Qr {g} any bedy CiQ.?'f3OfE.i_:?ie§.'VéS§:.a5f§S«he€f; érua partnership fizfre.' A:fe;§Vév£:Eére_:iij--Eg§,< :;~;~ under am/Vi'E*.'z??'~"':.__' .. 'V (B) 3 persen """ '"é.zs;:%r:.:<§Vf,i's is from outside '<I§3dVia;'d'§t:eVs »Tr;§"E;T.__fi'3:a{e'any office in India.
2. x"!"%1E$~m:>téfi¢;3vf:'ir:-;f:~'L' shaii came irate farce on first c;i§é32'w._.§c§f January; 2605."
"T»_h?e §;aT§¢§_"'«._§i:9éL:_E:a':f. was amended further by Natificatfcm ' N03-},{'::2 {3C?6 19"' Agrii, 2806 which reads as under:
Se'i'2g_i?;es groxséded from ceuntry ether than md§a~Ta'>< iiabiiitymémendment to Notificaticn "r::?o.3e;2QQ4«~$:{.
....l2....
In exercise of the piewerg canferred by s;ubwse<:ti'or1 {2} of sectien of 68 of the Finamte . Act, 1994 (32 cf 1994}, the <:ené;;§Q V"- ""V Governrmnt hereby makes the foifawing 'V'. amendment in the i'E{)'[iEI'i(:;§'{iG¥"§ '- Gavemment of India in the (Department of Revenue) "
Tax, dated the 313* Decer§i_ljet.j{ 20023 <.";.s;'a_.é%;<;r«--%V (E); dated the 31" Decembéi";«.'2DQ4, § In the said noté'f:t;:t:dn.,.§'i'~re:5r (B), the fofiawéng vparag"ra'p?*é": géfiétituted, nameiyzf A "{8} aikiy :éé'.:fyui'Ce..:.V~pV§QvE'ded or to be prejgkédéci than India and rec:é~.:_ve~d" section 66A of the FEr:an <:e 'A::'tv; i'99%'f1 _ J !'+'mji:Vider€' N--.é'tEfi"<:.a'ti0n ':#;ab".':4/20o5~s.T. dated omune----2oe5, imaé .i;séVu2:d'~«.wi:i'<;h_freads as under: ~ A'--.4Seryi£€LAjt¢x Habiiéty when on gergon ether than Serxkhtte pmvEder$~Amendment he Notificatiém & k ' A. * = .w.3M%6;2a04-S.?.
H 13 UWIIK In exercise of the pewers coeferred by eube section (2) of sectitzn 68 of the Finance Act; 3 1994 (32 of 1994), the Centre! Gevernment; being satisfied that it is necessary in the interest S0 to do, hereby makes the feif-.ei2vine3:VV' further amendments in hGtif.iC_atien'""d"f~:"the~. Government of India in the (Department of Revenue) i\io4.'3€{/'2GO<%r.S.t§tv;.ce V é Tex, dated the 313' Decerniber, 2504 w.hiE£:h ;3ubEisE'1ed in the ef Extraerdiraary, dated the 3:5' Decenfeer,' In the said4nt>tE'fiCe_tiV'o"ni'it: .. 'V
(a) in in..4vs;A;;t5;»i§e'fegraph (iv), """ ""i'n-- jifetfthei "estabiished by err ; "words "formed or A "regEsté-red.VAuede.t}' xshaié be substituted; .. ';_"_f' :5' x...» for v.,";}z31'i'a§'rEi;;)ff"1 (B), the foiiewing ;;1arag:7a'p'i*:---'sha§i be substituted nemeh/:»~ "~i'Teny.._texebie service provided or to be it by a person, who has ~ee$tAebiEshed e business or has a fixed estabiishrnent from white the service is provided or to be erevided, or has his permanent address at eeuei eiace eff
-14..
residence, in a ceuntry ether than Incléai, and such service provider does :30: have any office in Irzdia."
In heme of these £\§C)'{if§C8ti0fi$ the Ceifirfai G<>'x?e':°:?:}fr}eh'*;: had '4 specified the person who is Eiabie té'»._pa§g"hs.€}r\}ih::gé-€é':»<'ih:":.he?:;_*A case sf a service provider wi"€o'«--_.E_Vs res-idiézg €h:?>:Vi:%'S"i®'j@,_HIHr].f»3ia' who has has fixed estabiishmentiim: I--.r:i_<:1ia "e':<.i¥_.%z'ho has no permanent: address in _ i'i_Qv;;»e:~ii§é;'-:;L*vvif.h'e__ParEEament has amended the Act. by '%36~A by the Fénanae Act on 18-4-2006 which reafig 'V V' .f'6$};P~;',--{:.h'a:fg'a'_Tbf__sea?vice tax on services reCéé\gVed_ f£'<}iji"1'A:/i:¢{"§£iiVi4S§ii'£i'.€%«"fFT€iia.-(1) Where ahy se_rviCé""spe:§fiieSAih'ciéuse (105) of section 65 A'A'?Vi"{a)fi:_iéhivvided er ta be provided by a person established a business or has a estabiishmenf: from which the Séirvice is provided er ta be provided er ' hag his permaneszt address or usuai piece ...15._ Gr residence, in a eeimtry other than Indie,end received rm CT ~....« by a eersen (itzereinaftef"E-V."' referred te as the recipient) who he::3V._«h'i§;" it ' piace ef eesirress, fixed esteibi_i.s§*r.ri9}fe.ijt;--i.::: . permanent address err'; usi§:'e:sE. i:>ia<:;e--.:"uf_ residence, in India;
such service shaii, for"the. gtaurpes-es t3fa»i4s__ sectieri, be the texabie'Vi'i'ser2_xir;e, it 'er1_:di":siit:i1 taxabie service .5"heAii b'e""t.§éjeted._& as ifthve recipient had himsieifr'ggrexzidiediiii'tifiewiisesrvice in India, and ri:cordErigi'y--efi§ 't'§'i.e,greVx;is'iA'e.vrie 0? this chapter ' v..'£ihe"-i»:re-Cipient ef the se'r§riir:Ve'ii..is edit'ii§tii$fiduai._"'3hd Such service ree.eiv'ed' ifiyiffhiire.vA4Vis:s._:"ef:tierwEse than fer the §)£,E!'Q(."r'iS4€*Of 'i.:sé".Vi'ra..;:i'e..y' business or commerce, :f;*:*ie_,:3rr.$iri.sAidi1s of this sub-~set:tiori shaii not . ..... .. V
-v._V"~ii>riii\/i.C1ed further that where the provider has his business estabiishmerit A'-~..__bot.%i~that ceuntry arid elsewhere, the ceveiiztryg where the establishment of the AA 'ii--~...prexrider ei' service directly cencereed with the 'rjrevisieri ef serviee is ieeatee, ehaii ee treated E /_..
._ 15 _ ed the country frerh which the service ie provided er to he provided. .
(2) Where a perser: is; carrying eh e bueirzessu through a permanent estabiishmerat in and through smother permanent e$tai:ai§shrri'eht:t:VV' in e cduhtry other than Ihd§a,__s;;t;h eer'rhe'rtent"'~~: '- estabiishmehts shali be trea»ted:.,,eA$fjV persehs for the eiirposesef thie?se'<:ti<>n. . 2 V Therefore It is clear that frG.rrf"~~..f;8--4?2QU6,.:the"-tée'rv'i'ce provided by a person whej is eut'si-ri:e-- the c0uht'r'y who has no fixed estabEishrrae'r§t_e_'c::r'r.p.erihe&h'eratL'address in the country, such a_ .te'><abie;:"ser\)_E'¢ee_s'h.é'_i!__ beitreeted as if the recipient of --$erv"i.::'e'V'had'~r._hihfiseif provided the service in India and"ee<;:ardi'ngi§,<VA'alfthée provisieras of this Chapter shaii" Th"er.eVfcjre prior to 18-4-2Gt')€:S the service tax \,,W,~.i;%it.;r. by the recihient, in the event the service gfi'irjn?'iE'dVeAr"":i%*'re$'n~i':;'e'iiteide the Country and he had he V _ perrh'ener3:te:i'drese er piace at business within the country. thes3e circumstances, the order passed by the 'r~__.e;3I_:L§eEE'e5te etrtheritv reiyihg oh the afereseid Judgmehte Q? E ..._1'7....
the Bambay High Court am Deihi High Court Cannat ba fauna' fauit with. Acccaréingly we do not see any merit:
this agpeai. Henge, it is dismissed.