2009 (5) TMI 521 - AT - Service Tax

Payment of Service Tax - The adjudicating authority raised demand of service tax from the assessee under category of Erection Commissioning or installation service . The Commissioner (Appeals) found that the contract executed by the assessee was indivisible and composite one and therefore set aside the above demand. Held that- it appeared that levy was pre-mature without the service being provided. The authority below had proceeded on the conception that 33 per cent of the advance received shall be value of taxable service. Once it was demonstrated by SCN that the levy was arrived at treating advance receipt as measure of taxation that would not be approved to be taxed without service being provided. On the above reasoning the appeal of the was to be dismissed without accepting the reasoning given by Commissioner (Appeals).

Summary

Issues:
1. Whether the contract executed by the respondent is indivisible and composite.
2. Tax treatment of advance payment received by the respondent for services to be rendered in the future.
3. Applicability of service tax on advance receipts before the service is provided.
4. Consequences of non-registration for a specific category of service.

Analysis:
1. The first issue revolves around the nature of the contract executed by the respondent. The Commissioner (Appeals) determined it to be indivisible and composite, aligning with a previous Tribunal decision. The revenue appealed this decision, arguing that the contract comprised various activities. However, the Tribunal upheld the original decision, emphasizing the composite nature of the contract.

2. Regarding the tax treatment of the advance payment received by the respondent, the adjudication process considered the advance as part of the gross value of the service, even though the service was yet to be provided. The Tribunal noted that the advance payment was taxed prematurely, without the actual service delivery. The Tribunal highlighted the specific percentage calculation based on relevant notifications and found that the levy was not justified in this case.

3. The issue of service tax applicability on advance receipts before service provision was a crucial point of contention. The Tribunal observed that the levy based on advance receipts as a measure of taxation was premature and not in accordance with the law. The Tribunal emphasized that taxable events should align with the actual provision of services, and in this case, the levy was deemed improper due to the absence of service delivery.

4. Lastly, the Tribunal addressed the consequences of non-registration for a specific category of service. It was noted that the appellant was not registered for the category of erection and commission service, which was considered a breach of the law. This non-registration aspect was highlighted as a significant factor contributing to the overall decision regarding the tax treatment and levy in the case.

In conclusion, the Tribunal dismissed the revenue's appeal, emphasizing the premature nature of the levy based on advance receipts and the lack of service provision. The decision underscored the importance of aligning tax events with actual service delivery and highlighted the consequences of non-registration for specific service categories.