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TMI Blog2023 (9) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant 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. - DR. RACHNA GUPTA, MEMBER (JUDICIAL) AND MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Shri Vinod Awtani, Chartered Accountant for the Appellant Shri S.K. Meena, Authorized Representative of the Department ORDER The present appeal has been filed by M/s Mahindra World City (hereinafter referred to as the appellant) to assail the order-in-original dated 01.02.2017 confirming the demand of Rs.7,29,47,175/- + Rs. 21,88,416/- along with penalty. 2. The bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s October 2012. He contended that as per Rule 6 of Service Tax Rules, 1994, service tax is required to be paid in the month in which the service is deemed to be provided. Hence the liability to pay service tax arises on the point of taxation. The impugned order had erred in computing the Point of Taxation in terms of Rule 3 of the Point of Taxation Rules, 2011 which states that the point of taxation is the earliest of the date of invoice / completion of service or the date of receipt of any advance. The Commissioner had failed to observe that there was change in rate of service tax with effect from 1.4.2012, from 10% to 12%.Thus the point of taxation is required to be determined in terms of Rule 4 of Point of Taxation Rules, 2011. 4. The learned counsel also submitted that the Rule 4 of the Point of Taxation Rules, 2011 starts with a notwithstanding clause whereby the said rule overrides the applicability of Rule 3 of the said Rules in cases where there is change in effective rate of tax. He stated that the law with respect to the effect of a non obstante clause has been clearly laid down by Hon ble Supreme Court in the case of G.M. Kokli and Others 1984 (Supp) Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant. Hence, there was no liability under Section 73A.The imposition of penalty under Section 77(2) for violation of Section 70 for improper disclosure in return was also incorrect. The learned counsel submitted that there was no improper disclosure in the returns as point of taxation arose in October 2012 and not in March 2012. The appellants had already disclosed the receipt of the amount of October 2012. 7. The learned Authorized Representative submitted that the Point of Taxation for the advance amounts received by the appellant shall be the date of receipt of the amount. In the present case, the appellant had received the amount of Rs. 10,62,33,750/- in March 2012. Therefore, as per the Point of Taxation Rules, 2011, the point of taxation was March 2012. The appellant never challenged the said date of taxation before the adjudicating authority and have already deposited interest amount for the period (March 2012 to October 2012) along with service tax, even before issuance of the show cause notice. 8. He further submitted that the appellant should have reflected the amount of advance of Rs. 10,62,33,750/- in their return due for the half year ending March 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance. 4. Determination of point of taxation in case of change in effective rate of tax.- Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a change in effective rate of tax in respect of a service, shall be determined in the following manner, namely: (a) in case a taxable service has been provided before the change in effective rate of tax,- (i) where the invoice for the same has been issued and the payment received after the change in effective rate of tax, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or (ii) where the invoice has also been issued prior to change in effective rate of tax but the payment is received after the change in effective rate of tax, the point of taxation shall be the date of issuing of invoice; or (iii) where the payment is also received before the change in effective rate of tax, but the invoice for the same has been issued after the change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereinafter. (F) after section 66A, the following sections shall be inserted with effect from such date as the Central Government may, by notification, appoint, namely: '66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. 11.1 This very fact that there was a change in the rate of service tax clearly takes the appellant s point of taxation from Rule 3 of POTR to Rule 4 of POTR. Further, 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. We also note 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 le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, we hold that 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, we hold that the demands and penalties confirmed against the appellant are not sustainable. 14. We draw our support from the decision of this Tribunal the case of Paharpur Cooling Towers Ltd. Vs Commissioner of Central Excise and Customs, Raipur [2015 (37) STR 550 (Tri-Del)], has held as follows: 3. As regards demand of Rs. 18,54,468/- confirmed on the advance receipt by the appellant, we find that the show cause notice itself concedes that service tax on the advance was paid (adjusted) subsequently and the appellant are also not contesting the said demand. As regards the interest of ₹ 2, 76, 359/-ordered to be recovered by the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited, AIR 1970 SC 1986 held that the amount is to be considered as earnest money if following principles are followed: (i) It must be given at the moment at which the contract is concluded. (ii) It represents the guarantee that the contract will be fulfilled or, in other words, earnest is given to bind the contract. (iii) It is a part of purchase price when the transaction is carried out. (iv) It is forfeited when the transaction fall through by reason of failure of the purchaser. (v) Unless there is anything to the contrary in the terms of the contract, on default committed by the buyer, the seller is entitled to forfeit the earnest. 7 . We find that in the appellant s case the above principles are equally applicable and hence there is no doubt to our mind that the advance cum-security bank guarantee to the assessee by the contract awarding party is in the form of earnest money. Thus, the same is not liable to tax. It is also found from the certificate issued by the Chartered Accountant that the assessee has discharged service tax liability on the entire amount of such advances. We thus find no reason to hold that the said amount is liable to be taxed at the ..... 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