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TMI Blog2011 (9) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... ter date when the rate went up, there is no reason for the department to turn around and say that the Appellant should not have paid tax in advance - provisions in Rule 4(b)(ii) and Rule 9 of the new Point of Taxation Rules, 2011 as amended by Notification 25/2011-S.T., dated 30-3-2011 have the same effect as our conclusion - Appeals are allowed X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rule 6(1) of the Service Tax Rules, 1994 the Service Tax is to be paid by the 5th of the month immediately following the calendar month in which the payments are received, towards the value of taxable service. They had discharged their tax liability as per this rule and there cannot be any demand for any differential tax due to subsequent change of rate of tax. (vi) According to the Appellants, Explanation-1 of Rule 6(1) of Service Tax Rules, 1994, relied upon by the lower authorities, will apply only to a situation where the service was not taxable when the value was received in advance but became taxable after some time. According to them this explanation cannot be relied upon in a situation where the service was taxable when money was received in advance and appropriate tax liability was discharged at the rate prevailing at the time of receipt of money. (vii) Rule 6(1) is silent on the issue of the rate of tax to be applied. The rate of tax under Section 66 of the Act was 8% for charging of the receipts received during the period from 1-4-2006 to 9-9-2004 and therefore the Appellants are not liable to pay the differential amount demanded. (viii) The argument of the adjudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid on the value of service attributable to the relevant month, or quarter, as the case may be." 5. The ld. SDR relies also on Circular 65/14/2003, dated 5-11-2003 issued from file F. No. B-3/7/2003-TRU (Part) which is reproduced below : "Subject : Payment of service tax in case of advance payment of value of services. I am directed to say that some doubts have been raised regarding payment of service tax in cases where a lump sum payment for a service to be provided in future over a certain period of time, is made in advance before the date on which the particular service came under the tax net, but the entire or part of such service is provided after the date on which it became taxable. The doubt appears to have arisen as Rule 6(1) of Service Tax Rules, 1994, provides for payment of tax on the value of service received during a month/quarter, and in the instant case, no payment is received after the date on which the tax came into force (for example a case where payments for coaching service is received before 1-7-2003 i.e. the date on which this service became taxable, but the entire or part of coaching is provided after that date). 2. In this regard it may be note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to which rate of tax applicable for calculating service tax was to be determined. (This lacuna was removed by Notification of Point of Taxation Rules, 2011 by Notification No. 18/2011-S.T., dated 1-3-11 which was further amended by Notification 25/2011-S.T., dated 31-3-11). There are further complications to the problem. Firstly service tax is payable only when value of service is realized. This is not the case with customs duty on goods imported or exported. In those cases duty is payable whether or not value is paid or realized. In the case of central excise duty also duty is not linked to realization of the value of goods. The second complication is that it is not easy to decide the date of performance of service, unlike in the case of date of import, export or clearance of goods. The issue at hand has to be examined keeping these complications in mind. 8. Since there were no specific provisions the Appellants plead for a harmonious construction of Section 65, 66, 67, 68 of Finance Act, 1994 and Rule 6 of Service Tax Rules, 1994. According to them such a harmonious construction would result in the interpretation that they are canvassing. Revenue is also relying o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding of service we are not able to agree with the point of view canvassed by Revenue. 12. We have also examined the Explanation in Rule 6(1). This explanation does not make any provision as to which rate of tax will apply in situation like the one at hand (whether that on date of receipt of value or that on date of providing service). This explanation says that the service provider need to pay tax only on that portion of value for which service tax has been provided. In the instant case the Appellant paid tax on the full value received. The department did not take any objection to such payment in advance. So at a later date when the rate went up, there is no reason for the department to turn around and say that the Appellant should not have paid tax in advance. So we do not find it proper to rely on this explanation to conclude that the rate of tax as prevalent at the time of providing service (This date itself is not a clear date in this case) will apply. We are of the view that during the relevant time the rate that was applicable at the time of receipt of value of service will apply in a case where the assessee chose to pay tax on the advance amount received. 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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