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2018 (5) TMI 888 - AT - Service TaxRate of tax - relevant date - works contract services - Composition scheme - the respondents had received an amount of ₹ 3,23,23,005/- after 01.03.2008, they had discharged service tax on the said amount only @2%. The department was of the view that such amount was received by the respondents after 01.03.2008 and hence they are liable to pay service tax on this amount @ 4% and not 2%. Held that - During the disputed period the taxable event for discharging service tax was rendition of services - The issue has been considered by the Hon ble High Court of Delhi in the case of Vistar Construction Pvt. Ltd. 2013 (2) TMI 52 - DELHI HIGH COURT , where it was held that the rate of tax applicable on the date on 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. The demand cannot sustain - appeal dismissed - decided against Revenue.
Issues:
Interpretation of service tax rate under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. Analysis: The case involved a dispute regarding the service tax rate applicable to a construction company registered under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. The company had opted for the composition scheme and paid service tax at 2%, which was later increased to 4% with effect from 01.03.2008. The issue arose when the company received payments after 01.03.2008 for services provided before that date. The tax department contended that the company should pay service tax at the increased rate of 4% on these post-2008 payments. However, the company argued that since the services were rendered before the rate hike, they were liable to pay service tax at 2% only, citing a precedent case - Vistar Construction Pvt. Ltd. Vs. UOI. The Tribunal examined the legal position and referred to the decision in the Vistar Construction case, which emphasized that the tax rate applicable is determined by the date when the services were rendered, not when the payments were received. The Tribunal highlighted a Supreme Court observation regarding the binding nature of circulars and instructions issued by authorities, stating that such directives cannot override legal pronouncements. It was concluded that the instruction dated 28-4-2008, which supported the tax department's stance, was invalid in light of the legal position established by the courts. Ultimately, the Tribunal upheld the Commissioner (Appeals)' decision to set aside the demand for payment of service tax at the increased rate. The Tribunal dismissed the department's appeal, emphasizing that the demand was not sustainable under the prevailing legal framework. The ruling reaffirmed the principle that the tax rate applicable to services should align with the rate in force at the time the services were provided, rather than when the payments were received.
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