01 December 2012
If a person raised invoice for service rendered in the year 2008 and the payment is recieved in 2009, then which rate shall be considered for determining service tax liability? 12.36% (in 2008) or 10.3% (in 2009)?
03 December 2012
In the current scenario the law as stated in Section 67A clearly states that the rate of service tax shall be the rate in force as applicable at the time when taxable service has been provided or agreed to be provided. In the period aforementioned in the query the law however was not clear as to the applicable date whether on rendition or payment basis. However regard may be had to the following case law of Reliance Industries v. CCE Rajkot (2008) where the CESTAT Ahmd. held that the rate applicable would be the date of service rendition:-
In the case of Reliance Industries Ltd. v. CCE, Rajkot [2008] 15 STT 29 (AHD. - CESTAT), the assessee was receiving consulting engineering services. The rate of service tax was 5 per cent prior to 14-5-2003 and it was enhanced to 8 per cent from 14-5-2003 and further enhanced to 10 per cent with effect from 10-9-2004. The original authority confirmed the demand of service tax along with interest and also imposed penalty of equal amount on the ground that even in respect of the services received on dates prior to 14-5-2003, the rate of service tax shall be as on the date of billing for payment. The Commissioner (Appeals) upheld the order of the original authority. The Tribunal held that the liability to service tax is on account of rendering of the services. There are variations in matters relating to manner of collection when compared to other taxes. It shall be normally paid by the person rendering services but in certain cases it shall be paid by the recipient of the services. Similarly, it need not be paid on the date of rendering of services but, subsequently, at the time of receiving the service charges. When the service tax is introduced for the first time on any service, in respect of the services already rendered on the dates prior to introduction of service tax, even if the payments are received on a subsequent date, no tax shall be leviable. Similarly, in absence of specific provision, the rate of tax applicable to service tax shall be rate prevailing on date of rendering services. In central excise also, the duty on clearances for any month (other than March) becomes payable within a few days in the following month. The rate of duty is what is applicable on the date of clearance and not on the date of payment. Therefore, the Tribunal held that the linking of the rate of duty to the one prevailing on the date of billing or date of payment was not legally justified.
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