2018 (2) TMI 480 - AT - Service Tax

Ascertaining rate of tax - Taxable event - whether the taxable event for discharge of service tax liability for the month of March 2008 is the date of rendering the services or it is the date of realization of taxable value? Held that - Hon ble High Court of Gujarat in the case of Commissioner of Central Excise Vs. Schott Glass India Pvt. Ltd. 2009 (1) TMI 45 - HIGH COURT OF GUJARAT has held that taxable event is the time of rendering the taxable service and not realization of payment thereof - appeal dismissed - decided against Revenue.

Summary

Issues:
Determining the taxable event for the discharge of service tax liability for the month of March 2008 - date of rendering services or realization of taxable value.

Analysis:
The judgment revolves around the issue of whether the taxable event for the discharge of service tax liability for March 2008 is the date of rendering services or the date of realization of taxable value. The respondent, a construction company, provided works contract services at different tax rates before and after 1.3.2008. The department contended that if services were provided before 1.3.2008 but payments were realized after that date, the higher service tax rate should apply. The adjudicating authority upheld this view, leading to a demand confirmation of &8377; 49,67,093 along with interest and penalty under section 76 of the Finance Act, 1994. However, the Commissioner (Appeals) reversed this decision, stating that the taxable event is the date of rendering taxable services, not the realization of payment, and allowed the appeal.

During the hearing, the department reiterated its grounds of appeal, citing a TRU letter clarifying the applicable service tax rate for works contracts. On the other hand, the respondent's counsel argued that the Commissioner (Appeals) decision was fair and referred to judgments by the Delhi High Court and the Supreme Court emphasizing that the taxable event is the rendition of service, not payment realization. The counsel highlighted the invalidity of the TRU letter dated 28.4.2008 based on previous court decisions.

The Tribunal, after hearing both sides, analyzed the case laws cited by the respondent's counsel, which supported the Commissioner (Appeals) decision. The Tribunal also considered the judgment of the Gujarat High Court, which affirmed that the taxable event is the time of rendering taxable services, not payment realization. Consequently, the Tribunal found no merit in the Revenue's appeal and dismissed it, upholding the decision of the Commissioner (Appeals) based on legal precedents and the interpretation of the taxable event in service tax matters.

This judgment clarifies the crucial distinction between the date of rendering services and the realization of payment in determining the taxable event for service tax liability. It underscores that the taxable event is the provision of services, aligning with established legal principles and court decisions emphasizing the significance of service rendition over payment realization in service tax matters.