2009 (8) TMI 288 - AT - Service Tax

Commercial Coaching and Training Service advances - The appellant collected a sum in the month of May 2003 and June 2003 respectively as advance coaching fee for coaching starting from July 2003 to March 2004 period. Even though the service became taxable w.e.f. 1-7-03 the respondent neither took the registration not deposited the service tax on the advance received by them for the taxable service being provided by them from 1-7-03 - The taxing event for the service tax is providing of service and therefore liability to pay the service tax would arise during the period when the service was provided - liability to pay the service tax would be on 5th day of the month immediately following the calendar month in which the service was provided. - In view of this the respondent s plea that since the payment had been received during the period prior to 1-7-03 when the ser vice was not taxable no service tax would be chargeable is not correct. - Same view has been taken by the Tribunal in the case of CCE Indore v. PT. Education and Training Ser vice Ltd. reported in 2009 (15) S.T.R. 453 - In view of settled legal position on this issue the impugned order setting aside demand is not sustainable. The Revenue s appeal is allowed.

Summary

Issues:
1. Liability of service tax on advance coaching fee received prior to the taxable period.
2. Interpretation of Rule 6(1) of the Service Tax Rules regarding the payment of service tax on advance payments.

Analysis:
1. The issue in this case revolved around the liability of service tax on advance coaching fees received by the appellant prior to the taxable period. The respondent had collected a substantial sum as advance coaching fee for services to be provided from a specific period, which fell within the taxable period. The show cause notice was issued for the demand of service tax on the total value of taxable service along with interest and penalties under relevant sections of the Finance Act, 1994. The Assistant Commissioner confirmed the demand and imposed penalties, which were later set aside by the CCE (Appeals) leading to the Revenue's appeal.

2. The learned Departmental Representative argued that as per the Board's Circular and judicial precedents, service tax was payable on the entire amount of advance received, attributable to the period when the service was taxable. Referring to Tribunal judgments, it was emphasized that the date of advance payment receipt cannot be considered as the date of service provision. The Tribunal's consistent stance was that the liability to pay service tax arises when the service is provided, regardless of the payment date.

3. The Member (T) carefully considered the submissions and records. It was noted that the commercial coaching service became taxable from a specific date, and the advance received was for services to be rendered during the taxable period. The liability to pay service tax is linked to the provision of service, and Rule 6(1) of the Service Tax Rules defers payment to a later date based on payment receipt. However, in cases of advance payments received before service provision, the tax liability arises when the service is actually provided. Citing Tribunal judgments, it was established that the payment date cannot be used to avoid service tax liability. Therefore, the impugned order was set aside, and the Revenue's appeal was allowed.

In conclusion, the judgment clarified the liability of service tax on advance payments received for services falling within a taxable period and emphasized that the payment date does not absolve the service provider from the tax obligation when the service is rendered.