Whether the effective rate of service tax would be date of provision of service or date of billing?

PJ/Case Laws/2012-13/1403

Case: COMMISSIONER OF SERVICE TAX V/S CONSULTING ENGINEERING SERVICES (I) PVT LTD

Citation: 2013-TIOL-60-HC-DEL-ST

Brief Facts: - The appellant is aggrieved by the order dated 16.03.2012 passed by the Customs, Excise and Service Tax Appellate Tribunal in Service Tax Appeal No.424 /2008 where this question has been answered in favour of the assessee and against the department. The Tribunal came to the conclusion that the rate of service tax would be 5% inasmuch as the services had been provided prior to 14.05.2003. While doing so, the Tribunal placed reliance on a decision of the Tribunal, West Zonal Bench, Ahmedabad in the case of Reliance Industries Ltd. Vs. Commissioner of Central Excise, Rajkot:2008 (10) STR 243 (Tri- Ahmd.) = 2008-TIOL-283-CESTAT-AHM. Thematter had travelled to the Gujarat High Court and the Gujarat High Court, itself, in the case of Commissioner of Central Excise & Customs Vs. Reliance Industries Ltd .: 2010 (19) STR 807 (Guj.) had affirmed the decision of the Ahmedabad Tribunal. However, this fact had not been brought to the notice of the Tribunal in the present case. In fact, the matter had travelled even up to the Supreme Court wherein the Supreme Court did not enter into the question because the same had become academic in that case. In other words, the Supreme Court had not expressed any view on this issue. However, the view of the Gujarat High Court is clear. The view of the Gujarat High Court is that the effective rate of service tax would be based on the date on which the service is provided and not the date of billing.

Appellant’s Contention: - The appellant revenue contended that the view taken by the Gujarat High Court is not binding on this Court and based upon this submission he sought to place reliance on Rule 5B of the Service Tax Rules, 1994. He also placed reliance on Rule 4(a)(i) of the Point of Taxation Rules, 2011 as also Section 67A of the Finance Act, 1994.

Reasoning of Judgment: - The Hon’ble High Court held that none of the provisions as ascertained by the appellant are applicable in the facts and circumstances of the present case as Rule 5B of the Service Tax Rules, 1994 came into effect on 01.04.2011 and was out of the statute books on 01.07.2012. Section 67A of the Finance Act, 1994, was inserted in the said Act by virtue of the Finance Act, 2012 w.e.f. 28.05.2012. In the present case, the relevant period is April, 2003 to September, 2003. Therefore, none of those provisions apply. Moreover, even Rule 4(a)(i) of the Point of Taxation Rules 2011 is not applicable because those Rules came into effect on 01.03.2011. In the absence of any Rules, they will have to examine as to what is the taxable event. The taxable event as per the Finance Act, 1994 is the providing of the taxable service. In the present case, they find that not only were the services admittedly provided prior of 14.05.2003 but also the bills have been raised prior to 14.05.2003. The only thing that happened after 14.05.2003 was that the payments were received after that date. That, in their view would not change the date on which the taxable event had taken place. Since the taxable event in the present case took place prior to 14.05.2003, the rate of tax applicable prior to that date would be the one that would apply. In the present case, the rate of 5% would be applicable and not the rate of 8%. Consequently, the decision went in favour of the respondent and against the appellant.

Decision: - The appeal was dismissed.

Comment:-The substance of this case is that prior to the Point of Taxation Rules, the rate of service tax is to be determined on the basis of taxable event i.e. rate prevailing at the time of provision of service.

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PJ/Case Laws/2012-13/1403

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