2015 (10) TMI 116 - AT - Service Tax

Rate of tax - whether service tax was required to be paid @ 8% when services were rendered or @ 10.2% when the bill for the service rendered was raised by the appellant - Penalty u/s 78 - Held that - Rate of service tax prevailing on the date of rendering of service will be the appropriate rate for payment of service tax except in the case of reverse charge mechanism where service tax is required to be paid on the date of receiving of bill for the services rendered. This view is fortified by the case law of Reliance Industries Ltd. vs. CCE Rajkot reported in (2008 (1) TMI 86 - CESTAT AHMEDABAD) - Decided in favour of assessee.

Summary

Issues:
1. Determination of appropriate service tax rate - 8% at the time of service rendered or 10.2% at the time of billing.

Analysis:
The appeal in question was filed concerning Order-in-Review No. (ST-86/09)09 of 2010, where a demand of Rs. 7,49,697/- along with interest and a penalty under Section 78 of the Finance Act, 1994 was confirmed against the appellant. The central issue revolved around whether service tax should be paid at the rate of 8% when services were rendered or at 10.2% when the billing for the services was raised by the appellant.

During the proceedings, the appellant did not appear, nor was there any request for an adjournment. The Revenue, represented by Shri R.K. Grover, strongly supported the Reviewing Authority's orders, arguing that the prevailing rate of duty at the time of billing should dictate the payment of service tax.

After hearing the arguments and examining the case records, it was established that the general principle dictates that the rate of service tax applicable at the time of service provision should govern the payment of service tax. An exception to this rule exists in cases of reverse charge mechanism, where service tax is due upon receiving the bill for services rendered. This position was supported by the case law of Reliance Industries Ltd. vs. CCE, Rajkot, as referenced in the judgment.

The judgment further cited the case law to emphasize that the rate of duty is determined by the prevailing rate at the time of service provision, not at the time of billing or payment. The Board's clarification highlighted in the case law reinforced this stance, indicating that the rate of service tax should align with the date of service provision, unless specific conditions triggering a change in the tax rate are met.

Ultimately, the Tribunal allowed the appeal filed by the appellant based on the above legal principles and observations, thereby setting aside the demand of Rs. 7,49,697/- along with the associated interest and penalty.