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2012 (8) TMI 169 - HC - Service TaxPoint of Taxation Rules, 2011 - rate of tax 10% or 12% - services which were provided before 01.04.2012 and even invoices were issued before 01.04.2012 and payment is received after 01.04.2012 - Held that - no coercive action shall be taken for non-payment of differential service tax.
Issues:
1. Impugned Circular's validity under Point of Taxation Rules, 2011 and Finance Act, 1994. Analysis: The petitioner argues that the Circular dated 08.05.2012 is ultra vires the Point of Taxation Rules, 2011 and the Finance Act, 1994. The petitioner highlights Point of Taxation Rules, 2011, particularly Rule 2(e) defining "point of taxation" as the time when a service is deemed to have been provided. The determination of the point of taxation in cases of a change in the effective rate of tax is provided under Rule 4. Sub-rule (a) of Rule 4 states the method for determining the point of taxation in cases of a change in the effective rate of tax. The issue raised pertains to services provided before 01.04.2012, with invoices issued before this date, but payments received after 01.04.2012. The Circular clarifies that even in such cases, where services were provided and invoices issued before 01.04.2012 but payments were received on or after 01.04.2012, service tax must be paid at the rate of 12%. However, prima facie analysis of Rule 4 suggests that in such cases, the applicable tax rate should be 10% and not 12%. The court has allowed time for the respondents to provide instructions in the matter and has issued formal notice. Counter affidavits, if any, are to be filed within one week, with a rejoinder to follow within the subsequent week. The case is listed for final arguments and disposal on 14th August 2012. It is clarified that due to a pure question of law being involved, even if counter affidavits are not filed, the matter will be heard finally. Additionally, no coercive action for non-payment of differential service tax shall be taken in the meantime. A miscellaneous application for exemption (CM No. 9238/2012) has been allowed, subject to just exceptions, and the application has been disposed of.
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