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TMI Blog2013 (2) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the instruction dated 28.04.2008 issued by the Tax Research Unit, Department of Revenue, Ministry of Finance, Government of India purportedly in exercise of the powers under Section 37B of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994. The petitioners in these writ petitions challenge the said instruction on the ground that it is contrary to the law as declared by the Supreme Court. 2. The main issue in these writ petitions is with regard to the applicability of the rate of service tax in respect of the Works Contract Service which is defined in Section 65(105)(zzzza) of the Finance Act, 1994. The case of the petitioner is that the said services were rendered prior to 01.03.2008 when the rate of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e show cause notice dated 16.02.2009 is only limited to this demand of Rs. 1,43,191/- and insofar as the remaining portion of the show cause notice is concerned that is not the subject matter of this writ petition and has been challenged separately by way of another writ petition with which we are not concerned today. 5. In so far as the WP(C) 3632/2012 is concerned that petition also challenges the instruction dated 28.04.2008 but, in addition, a challenge has been made to the show cause notice dated 30.9.2009 and the adjudication order dated 28.03.2012 whereby a demand of Rs. 3,16,329/- has been confirmed against the petitioner. The said sum of Rs. 3,16,329/- is partly on account of service tax employing the higher rate of tax of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on the applicable rate of service tax for the Works Contract service [Sec.65 (105)(zzzza)] where the payment for the said service provided or to be provided is received on or after 1.3.2008. 2. A person providing Works Contract service can opt to pay service tax under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. As per the composition scheme, the service provider was having an option to pay 2% of the gross amount charged for the works contract as service tax. However, the rate of 2% has been revised to 4% with effect from 1.3.2008. Commissioner (ST), Delhi has indicated his view that the applicable rate would be the rate prevailing on the date the services were agreed to be provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai-400012 (iii) Commissioners of Service Tax, Ahmedabad/ Bangalore/Chennai/Delhi/Kolkata/ Mumbai" 7. Ongoing through the said instruction and particularly para 3 thereof it appears that that the view of the respondents is that service tax becomes chargeable on receipt of payment for the service whether or not the services are performed. This view is clearly wrong. We say so because the Supreme Court in the case of Association of Leasing & Financial Service Companies Vs. UOI: 2010 (20) STR 417 (SC) has categorically held as under: "Thus, the impugned tax is levied on these services as taxable services. It is not a tax on material or sale. The taxable event is rendition of service." 8. Therefore, the taxable event, in so far as servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or rendition of the taxable services. This is exactly what the Supreme Court had held in Association of Leasing & Financial Service Companies (supra). 10. Therefore, 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 instruction dated 28.04.2008 which is contrary to the law declared by the Supreme Court is clearly invalid. In Commissioner of Central Central Excise, Bolpur Vs. Ratan Melting & Wire Industries 2008 (12) STR 416 (SC), a constitution bench of the Supreme Court observed as under: "Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that instruction is set aside the statutory authorities would continue to apply that instruction and the petitioner would have no remedy before the said authorities. Since the instruction dated 28.04.2008 has been held by us to be invalid, the show cause notice pertaining to the subject matter indicated by us as also the adjudication order would also have to go and it is for this reason that we have entertained these writ petitions and allowed the same. 13. The decision relied upon the learned counsel for the respondent in the case of Union of India and Anr. Vs. Vicco Laboratories: (2007) 13 SCC 270 is not applicable in the facts and circumstances of the present case inasmuch as the very basis of the show cause notices in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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