2023 (9) TMI 237 - AT - Service Tax

Enhancement of rate of Service Tax - works contract service for the period ending in March 2008 - Department was of the view that the assessee having received the amount after 01.03.2008, was liable to pay Service Tax at the enhanced rate of 4.12% - applicability of Circular issued by the Board in F. No. 345/6/2007-TRU dated 28.04.2008 - HELD THAT - The Hon ble High Court of Delhi in the case of VISTAR CONSTRUCTION (P) LTD/PIYARE LAL HARI SINGH BUILDERS PVT LTD VERSUS UNION OF INDIA AND ORS 2013 (2) TMI 52 - DELHI HIGH COURT has considered the very same Circular and on the issue as to whether differential amount of Service Tax at the enhanced rate is applicable when services have been completed prior to 01.03.2008. The Hon ble High Court observed that as per the decision of the 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 , the demand cannot sustain. The Commissioner (Appeals) has relied on the decision in the case of Association of Leasing and Financial Service Companies (supra) to hold that the demand at the enhanced rate cannot sustain - the view taken by the Commissioner (Appeals) agreed upon - the appeal filed by the Department is without merits. Appeal dismissed.

Summary

Issues involved:
The issue involved in the present case is whether the demand of Service Tax at the enhanced rate of 4% is sustainable when the services have been provided prior to 01.03.2008.

Summary:

Issue 1:
The appellant provided services prior to 01.03.2008 and paid Service Tax at the rate of 2.06%. The Department contended that the appellant, having received the amount after 01.03.2008, was liable to pay Service Tax at the enhanced rate of 4.12%.

Issue 2:
Show Cause Notice was issued proposing to demand the differential tax along with interest and penalties. The original authority confirmed the demand, interest, and penalties, which was set aside by the Commissioner (Appeals). The Department appealed to the Tribunal.

Issue 3:
The Department relied on a Circular stating that the rate applicable for works contract service transactions is 4% if payment is received after 01.03.2008. The appellant argued that the taxable event is the provision of service, completed before 01.03.2008, and therefore, the enhanced rate is not applicable.

Decision:
The Hon'ble High Court of Delhi held that the rate of tax applicable when services were rendered is relevant, not the rate on the date of payment receipt. The Circular issued by the Board was deemed invalid as it contradicted the law declared by the Supreme Court. The Tribunal dismissed the appeal, agreeing with the Commissioner (Appeals) that the demand at the enhanced rate was not sustainable.

This summary provides a detailed overview of the case, including the issues involved, arguments presented by both parties, and the final decision based on legal interpretations and precedents.