In a significant ruling, the division bench of the Bombay High Court held that the circular dated 14.10.2014 issued by the Government with a view to levy Service Tax on Indian entity/ bank rendering agency services to foreign Money Transfer Service Operator (MTSO) has no binding effect since it supersedes the circular dated 12.07.2012.
The petitioners, All India Association of Authorized Money Changers & Money Transfer Agents, approached the High Court challenging the vires of the circular No.180/06/2014-ST dated 14.10.2014 issued by the Government on ground that the circular violates the provisions of the Finance Act, 1994.
As per the Circular dt. 12.07.2012, the foreign exchange remitted to India from outside were exempted from the Service Tax net for the reason that money does not constitute a service and that conversion charges or fee levied for sending such money would also not be liable to service tax as the person sending money and the company conducting the remittance are both located outside India. The circular also clarified that the Indian bank or financial institution who provides service to the foreign bank or any other entity is not liable to service tax as the place of provision of service shall be the location of the recipient of service. In the year 2014, the Government issued the impugned circular and stated that service tax is leviable on the services provided by the Indian Bank or other entity acting as an agent to the [MTSO], in relation to remittance of foreign currency from outside India to India. The petitioner contended that there is no change in law till the date of the circular and therefore, the impugned circular supersedes the earlier circular.
The petitioners also produced an Office Memorandum stating that circulars and instructions issued by the Board are not binding on the Court or the assessee.
It was contended on behalf of the Revenue that as stated in the Office memorandum submitted by the petitioners, the impugned circular is binding on the revenue authorities as it correctly interprets the statutory provisions.The circulars and instructions issued by the Board are binding in law on the authorities unless they are in conflict with the statutory provisions.
The bench observed that admittedly, the petitioners association have not been assessed to tax.
The division bench comprising of Justice S.C Dharmadhikari and Justice Prakash D Naik clarified that in the event they are assessed to service tax the office memorandum produced by the petitioners can never bind the statutory authorities. “The Central Government cannot direct the assessing officer to take a particular view of the matter as that would be a direct interference with his powers as an assessing officer. He has to exercise the powers in accordance with law. In the event, there are circulars issued and prior to the impugned one, then, they would continue to bind the Assessing Officer and others unless the revenue officials are able to point out that they are plainly inconsistent or in conflict with the provisions of law. Therefore, we clarify that the assessing officer should not be influenced by any directions and contents of the office memorandum. He should not go by the subsequent circular dated 14th October, 2014 which supersedes the earlier circular of 10th July, 2012. He must allow the assessee to raise all contentions and consider them in accordance with law.”
Read the full text of the Judgment below.
