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2022 (9) TMI 271 - AT - Service TaxLevy of service tax - taxable event - supplementary invoice - cost escalation clause - It is the contention of the department that such invoices should have been taxed at 12% and not at 10% on account of Rule 4(a)(1) of the Point of Taxation Rules, 2011 - HELD THAT - The Appellant was engaged in providing service in the categories of Goods Transport Agency and Survey and Exploration of Mineral Services . They were awarded with the work order dated 09.01.2009 by Central Mine Planning and Design Institute Limited (CMPDIL), Ranchi for coal exploration in Siyan, South Block and Chirra, North Block both at Mand, Raigarh Coalfield, Chhattisgarh. The Appellant submitted the Service Tax Returns showing payment of Service Tax. The work was completed during the financial year 2010-11 and 2011-12 and Bills for the same were also raised and payments were received. The Service Tax @ 10% was payable at that point of time and the said rate was changed from 01.04.2012 from 10% to 12% by Notification No.2/2012-ST dated 17.03.2012. Subsequently due to escalation of price for enhancement of labour costs and materials etc. price of the work order was enhanced for the job already completed. The escalation was nothing but continuation of the earlier Bills which were raised during the period from December 2010 to November 2011. It was also submitted on behalf of the Appellant that supplementary tax invoice is a invoice that a taxable person issues if deficiencies are found in a tax invoice already issued by the said taxable person. The escalation of price subsequently made and consequently supplementary invoices were raised. Applicability of rate of Service Tax in respect of the services provided to Central Mining Planning and Design Institute Limited (CMPDIL), Ranchi - case of the Appellant is that the said services were rendered prior to 01.04.2012 when the rate of Service Tax on the said service was increased from 10% to 12% vide Notification No.2/2012-ST - HELD THAT - Hon ble Supreme Court in the case of ASSOCIATION OF LEASING FINANCIAL SERVICE COMPANIES VERSUS UNION OF INDIA AND OTHERS 2010 (10) TMI 4 - SUPREME COURT has observed that The taxable event is rendition of service. Hence, the impugned tax is different and distinct from tax on sale of goods under Entry 54 List II of the VIIth Schedule to the Constitution . Therefore, the rate of tax applicable on the date on which the services were rendered would be the one that would be relevant and not the rate of tax on the date on which supplementary invoices were raised. Therefore, the taxable event in so far as Service Tax is concerned, is the rendition of service. That being the position, the taxable events in the present Appeal had admittedly occurred prior to 01.04.2012. At that point of time the rate of Service Tax applicable in respect of services in question was 10% and not 12% which came into effect only on or after 01.04.2012 - The issuance of supplementary invoices in the month of July 2012 would not make any difference because it is not receipt of payment which is taxable event, but the rendition of service. Further, in the Point of Taxation Rules, 2011, Section 2(e) defines Point of Taxation means the point of time when a service shall be deemed to have been provided. Appeal allowed - decided in favor of appellant.
Issues:
Applicability of service tax rate on supplementary invoices issued after the increase in service tax rate from 10% to 12%. Analysis: The appellant, engaged in Goods Transport Agency and Survey and Exploration of Mineral Services, faced a demand for service tax of Rs. 11,73,425/- along with interest and penalty. The issue revolved around the appellant issuing supplementary invoices post an increase in service tax rate from 10% to 12% w.e.f. 01.04.2012. The department contended that the invoices should have been taxed at 12% as per Rule 4(a)(1) of the Point of Taxation Rules, 2011. The appellant had completed work for Central Mine Planning and Design Institute Limited during 2010-11 and 2011-12, paying service tax at 10%. Subsequently, due to cost escalation, supplementary invoices were issued in July 2012 at 10% service tax rate, even after the rate had increased to 12%. The department argued for taxing these invoices at 12% post the rate change. The main issue was the applicability of the service tax rate on services provided before the rate increase but invoiced later at the old rate. The appellant relied on the principle that the tax rate applicable is that at the time of service provision, not at the invoice date. Citing the Association of Leasing and Financial Service Companies v. Union of India case, the tribunal emphasized that the taxable event is the service rendition date, not the invoice date, thus the 10% rate applied. Referring to the Point of Taxation Rules, 2011, the tribunal highlighted that the point of taxation is when the service is deemed to be provided, supporting the conclusion that the service tax rate at the service rendition time prevails. Consequently, the tribunal set aside the impugned orders, allowing the appeal with consequential relief, aligning with the Supreme Court's precedent. In conclusion, the tribunal's decision centered on the principle that the service tax rate applicable is determined by the service rendition date, not the supplementary invoice date, as supported by legal precedents and the Point of Taxation Rules, 2011.
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