Tax rate applicable on date of rendition of service is relevant.

PJ/Case Law /2016-17/3231

Case:-COMMISSIONER OF SERVICE TAX, DELHI VERSUS BAGAI CONSTRUCTION
Citation:- 2016 (41) S.T.R. 433 (Tri. - Del.)
Brief Facts:- Stay petition along with appeal has been filed by Revenue against the Order-in-Appeal No. 223/ST/D-I/2012, dated 22-11-2012 in terms of which service tax demand of Rs. 13,25,005/- confirmed along with interest and penalties by the primary adjudicating authority was set aside.
The issue involved in this case essentially is that the appellant paid service tax under the Works Contract Service @ 2.06% under Composition Scheme on the ground that service was rendered before 1-3-2008 although the payment was received after 1-3-2008, while the primary authority held that the correct rate of tax was 4.12% which was the rate applicable on the date of receipt of payment. The impugned demand arose as a result of the above dispute.
Appellant’s Contention:-The ld. DR agreed that the said judgment of Delhi High Court covers the issue.
Respondent’s Contention:-It is contended by the respondent that the issue is no longer res integra and is settled by Delhi High Court in the case of Vistar Construction (P) Ltd. v. Union of India & Ors. - 2013-TIOL-73-HC-DEL-ST = 2013 (31) S.T.R. 129 (Del.).
Reasoning Of Judgement-The court has considered the respondent’s contention and find that in the case of Vistar Construction (supra), the Delhi High Court has held that “the taxable event, in so far as service tax is concerned, is the rendition of the service. That being the position, the taxable events in the present writ petition had admittedly occurred prior to 1-3-2008. At that point of time the rate of service tax applicable in respect of the services in question was 2% and not 4%, which came into effect only on or after 1-3-2008. Therefore the rate of tax applicable on the date of which the services were rendered would be the one that would be relevant and not the rate of tax on the date on which payments were received.” The Delhi High Court in that judgment further held that the “TRU Circular F. No. 545/6/2007-TRU, dated 28-4-2008 is contrary to law as declared by the Supreme Court and therefore has no existence in the eyes of law”.
In the light of the issue having been settled in favour of the respondent by the said judgment of Delhi High Court in the case of Vistar Construction (supra), we find no merit in the Revenue’s appeal. Therefore the stay petition and appeal are dismissed.
Decision:-Appeal dismissed.
Comment:- The crux of this case is that as per the Delhi High Court decision in case of Vistar Construction (P) Ltd. v. Union of India & Ors,sincethe taxable event in relation to service tax is the rendition of the service, the rate of tax applicable on date of rendering service is to be applied. Therefore, the tax rate applicable on the date of which the services were rendered would be relevant and not the rate of tax on the date on which payments were received. The Delhi High Court in that judgment further held that the TRU Circular F. No. 545/6/2007-TRU, dated 28-4-2008 is contrary to law as declared by the Supreme Court and therefore has no existence in the eyes of law.
Prepared By:- Neelam Jain

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PJ/Case Law /2016-17/3231

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