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2023 (9) TMI 1140 - AT - Service TaxLevy of Service tax - part amount/earnest amount - Point of taxation rules - HELD THAT - As per Rule 4(b)(iii), the point of taxation would be the date of issuing of invoice, which in the instant case is October, 2012. It is also noted that as per section 67A of the Finance Act, 1994, the rate of service tax, the value of a taxable service shall be the rate or value in force or as applicable at the time when the taxable service has been provided or agreed to be provided. It is noted that the appellant and the service recipient had merely entered into a Memorandum of Understanding in March, 2012 for leasing of land, and advance amount was paid to the appellant. The service of provision of leased land was provided in October, 2012. It is also apparent that the invoices for the said provision of service were raised on 23.10.2012. The above two dates are crucial to determine the date of provision of service in the instant case, that too in terms of Rule 4 POTR. From said two dates, it is clear that the service was provided after change in effective rate of tax and the invoice also has been raised after the change in effective rate of tax, though the part payment of Rs 10,62,33,750/- was received before the change in effective rate of tax. Thus, the case of appellant gets squarely covered under Rule 4(b)(iii) POTR. In the given set of facts and applicability of Rule 4(b)(iii) POTR there remains no service tax liability on advance received by the assessee. Hence, the demands and penalties confirmed against the appellant are not sustainable. The impugned order cannot be upheld and is therefore set-aside - Appeal allowed.
Issues Involved:
1. Determination of Point of Taxation for the advance amount received. 2. Applicability of Rule 3 vs. Rule 4 of the Point of Taxation Rules, 2011. 3. Liability for excess collection of service tax. 4. Imposition of penalty under Section 77(2) of the Finance Act, 1994. Summary: 1. Determination of Point of Taxation for the advance amount received: The core issue was whether the appellant, M/s Mahindra World City, was liable to pay the entire service tax of Rs. 7,44,06,119/- in March 2012 when it received an advance amount of Rs. 10,62,33,750/-. The appellant argued that the point of taxation should be October 2012, as per Rule 4 of the Point of Taxation Rules, 2011 (POTR), due to a change in the effective rate of tax from 10.30% to 12.36% in May 2012. The Department contended that the point of taxation was March 2012, as per Rule 3 of POTR, since the advance was received then. 2. Applicability of Rule 3 vs. Rule 4 of the Point of Taxation Rules, 2011: The Tribunal examined the applicability of Rule 3 and Rule 4 of POTR. Rule 4, which begins with a non-obstante clause, overrides Rule 3 in cases of a change in the effective rate of tax. The Tribunal noted that the advance amount was received in March 2012, the rate of service tax changed in May 2012, and the lease agreement was signed, and invoices were issued in October 2012. Therefore, the point of taxation should be determined under Rule 4, making October 2012 the relevant date. 3. Liability for excess collection of service tax: The Commissioner had erroneously calculated an excess collection of Rs. 21,88,416/- based on the old tax rate of 10.30%. Since the point of taxation was October 2012, the applicable rate was 12.36%, and there was no excess collection by the appellant. Thus, there was no liability under Section 73A. 4. Imposition of penalty under Section 77(2) of the Finance Act, 1994: The penalty for improper disclosure in the return was also contested. The Tribunal found that the appellant had disclosed the receipt correctly in October 2012, aligning with the correct point of taxation. Therefore, the imposition of penalty under Section 77(2) was incorrect. Conclusion: The Tribunal concluded that the appellant's case falls under Rule 4 of POTR due to the change in the effective rate of tax. The service tax liability arose in October 2012, not March 2012. Consequently, the demands and penalties confirmed against the appellant were not sustainable. The appeal was allowed with consequential relief to the appellant.
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