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2011 (9) TMI 809 - AT - Service TaxDetermination of rate of service tax - Refund of Service Tax of Rs. 2,24,624/- on the ground that such amount of tax was paid erroneously, as directed by the Superintendent of Service Tax, but under protest - circular No. 59/8/2003, dated 20-6-2003 wherein it was clarified that in view of the notification 11/2003-S.T., dated 20-6-2003, no service tax would be payable where maintenance contracts are entered into before 1-7-2003, provided the invoices are raised and paid prior to 1-7-2003 - Held that - Section 65(105) of Finance Act, 1994, defines taxable services including service to be provided and Rule 6 of Service Tax Rules prescribes payment of tax on consideration received during the calendar month without any reference to actual providing of service we are not able to agree with the point of view canvassed by Revenue - The department did not take any objection to such payment in advance. So at a later date when the rate went up, there is no reason for the department to turn around and say that the Appellant should not have paid tax in advance - provisions in Rule 4(b)(ii) and Rule 9 of the new Point of Taxation Rules, 2011 as amended by Notification 25/2011-S.T., dated 30-3-2011 have the same effect as our conclusion - Appeals are allowed
Issues Involved:
1. Refund claim for erroneously paid service tax. 2. Applicability of the rate of service tax on advance payments. 3. Interpretation of relevant sections and rules of the Finance Act, 1994 and Service Tax Rules, 1994. 4. Retrospective application of tax amendments. 5. Validity of reliance on CBEC Circulars. Detailed Analysis: 1. Refund Claim for Erroneously Paid Service Tax: The appellants filed a refund claim for Rs. 2,24,624/- on the ground that the service tax was paid erroneously under protest. They argued that they paid the service tax at the rate of 8% on the amounts received before 10-9-2004, which was the rate prevalent at the time of payment. The Superintendent of Service Tax directed them to pay the differential service tax at the increased rate of 10.2% for services rendered after 10-9-2004. The Assistant Commissioner rejected the refund claim, which was upheld by the Commissioner (Appeals). The appellants then filed an appeal with the Tribunal. 2. Applicability of the Rate of Service Tax on Advance Payments: The appellants contended that the service tax should be levied based on the rate applicable at the time of receipt of the payment, not at the time of providing the service. They argued that Section 65(105) of the Finance Act, 1994, defines "taxable service" as "services provided or to be provided," indicating that the charge is with reference to the receipt of the value of the service. 3. Interpretation of Relevant Sections and Rules: The appellants argued for a harmonious construction of Sections 65, 66, 67, and 68 of the Finance Act, 1994, and Rule 6 of the Service Tax Rules, 1994. They contended that Rule 6(1) prescribes the payment of tax on the value of taxable services received during a month without reference to the actual provision of the service. The Tribunal noted that unlike the Customs Act or Central Excises Act, the Finance Act, 1994, did not have a clear provision regarding the date for determining the applicable rate of tax. The Tribunal concluded that the rate applicable at the time of receipt of the value of the service should apply. 4. Retrospective Application of Tax Amendments: The appellants argued that any amendment affecting vested substantial rights or imposing new burdens cannot be applied retrospectively unless explicitly stated. They cited the maxim "nova constitutio futuris forman imponere debet non praeteritis" and relevant case laws to support their argument. 5. Validity of Reliance on CBEC Circulars: The appellants contended that the CBEC Circular 65/2003-ST, dated 5-11-2003, could not override the statutory provisions. They cited several Supreme Court judgments to support their argument that a circular cannot override the statute. The Tribunal noted that the circular was issued before the amendment to Section 65(105) in 2005, which included services "to be provided," and thus the circular did not take this change into account. Conclusion: The Tribunal allowed the appeal, concluding that the rate of service tax applicable at the time of receipt of the value of the service should apply. The Tribunal noted that the provisions in Rule 4(b)(ii) and Rule 9 of the new Point of Taxation Rules, 2011, as amended by Notification 25/2011-ST, dated 30-3-2011, supported their conclusion. The appeal was allowed with consequential benefits. Pronouncement: The judgment was pronounced in open court on 9-9-2011.
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