2015 (9) TMI 103 - AT - Service Tax

Demand of service tax - Works Contract Service - Composition Scheme - Held that - In the case of Vistar Construction (2013 (2) TMI 52 - DELHI HIGH COURT), the Delhi High Court has held that the taxable event, in so far as service tax is concerned, is the rendition of the service. That being the position, the taxable events in the present writ petition had admittedly occurred prior to 1.3.2008. At that point of time the rate of service tax applicable in respect of the services in question was 2% and not 4%, which came into effect only on or after 1.3.2008. Therefore the rate of tax applicable on the date of which the services were rendered would be the one that would be relevant and not the rate of tax on the date on which payments were received. - Decided against Revenue.

Summary

Issues:
Interpretation of service tax rate under Composition Scheme before and after a specific date.

Analysis:

The Appellate Tribunal CESTAT NEW DELHI dealt with a case where the Revenue filed a stay petition and appeal against an order setting aside a service tax demand. The primary issue revolved around the correct service tax rate applicable under the Works Contract Service Composition Scheme. The appellant argued for a lower rate based on the service rendered date, while the primary authority insisted on a higher rate based on the payment receipt date. The respondent cited a Delhi High Court judgment, asserting that the taxable event for service tax is the service's rendition, not the payment receipt. The Tribunal acknowledged the Delhi High Court's decision in Vistar Construction case, emphasizing that the tax rate applicable at the service rendition date is crucial, not the payment receipt date. The Tribunal also noted the High Court's rejection of a TRU Circular as contrary to law. Consequently, the Tribunal dismissed the Revenue's appeal, aligning with the settled interpretation from the Delhi High Court's judgment in Vistar Construction case.

This judgment clarifies the significance of the service rendition date in determining the applicable service tax rate under the Composition Scheme. It underscores that the rate in force at the time of service provision prevails over the rate at the payment receipt date. Moreover, the Tribunal's reliance on the Delhi High Court's decision in Vistar Construction case solidifies the legal principle that the taxable event for service tax is the service's rendition. The Tribunal's dismissal of the Revenue's appeal reflects a consistent application of this legal interpretation, emphasizing the precedence of the service provision date in determining the applicable tax rate.