2008 (1) TMI 86 - AT - Service Tax

Appellant was receiving consulting engineering services from the service provider located outside India rate of tax enhanced from 5% to 8 % from 14.5.03 - assessee submits that the rate of duty should be the rate applicable at the time of receiving services and it has no relevance to the date of billing or date of payment for the same service has been rendered prior to introduction of tax , so no tax shall be leviable, even if payments were made subsequent to introduction

Summary

Issues:
1. Applicability of service tax rate based on the date of billing or date of receiving services.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Ahmedabad involved a dispute regarding the applicability of service tax rate concerning consulting engineering services received from a provider outside India. The original authority had confirmed a demand for service tax, interest, and penalty, based on the rate of service tax at the time of billing for payment, even for services received before specific rate changes. The Commissioner (Appeals) upheld this decision.

The appellant argued that the rate of duty should be based on the time of receiving services, not billing or payment dates. To support this contention, the appellant cited various Tribunal decisions. On the other hand, the learned SDR supported the Commissioner's decision, linking service tax liability to the payment of service charges and relying on a CBEC Circular.

After considering both sides' submissions, the Tribunal held that the liability for service tax arises from the rendering of services, with variations in collection methods compared to other taxes. The Tribunal emphasized that the rate of tax applicable to service tax should be the rate prevailing at the time of rendering services, in the absence of specific provisions stating otherwise. Drawing a parallel with Central Excise duty, the Tribunal highlighted that the duty is based on the rate applicable at the time of clearance, not payment.

The Tribunal also referenced a Board's clarification regarding the rate of duty, emphasizing that the rate applicable is determined at the time of billing, not payment. However, the Tribunal concluded that this clarification does not justify linking the rate of duty to the billing or payment date. Therefore, the Tribunal allowed the appeal, providing consequential relief to the appellant.

In summary, the judgment clarified that the rate of service tax should be based on the date of rendering services, and not on the date of billing or payment. The decision provides important insights into the determination of service tax rates and highlights the significance of the timing of service provision in tax liability assessment.