THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 07.05.2013
+ CEAC 23/2013
COMMISSIONER OF SERVICE TAX ..... Petitioner
versus
RATAN SINGH BUILDERS PVT LTD ..... Respondent
Advocates who appeared in this case:
For the Appellant : Mr Geetanjali Sharma, Advocate.
For the Respondent : Mr Ruchir Bhatia, Advocate
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
CM No. 6603/2013 (Exemption)
Allowed subject to all just exceptions.
CM No. 6602/2013 (for condonation of delay in refiling)
The delay in refilling is condoned.
The application stands disposed of.
CEAC 23/2013
1. This appeal is directed against the order dated 27.02.2012 passed by the
Customs, Excise & Service Tax Appellate Tribunal in service ST Stay No.
1989/2011 and ST Appeal No. 965/2011. The Tribunal observed that the issue
involved in the present case was whether the applicable rate of service tax would
be the rate in force at the time of realisation of the consideration in respect of the
CEAC No23/2013 Page 1 of 4
taxable service or would it be the rate of tax which was in force at the time of the
rendition of the taxable service. The Tribunal noted that recently it had decided
that the appropriate rate of tax would be the rate which was in force at the time
when the service was rendered and not the rate which was in force on the date in
which the payments were received. Accordingly, the Tribunal dismissed the
Revenue's appeal.
2. The revenue is aggrieved by the said order dated 27.02.2012 and has
preferred the present appeal before us.
3. We may point out that the entire controversy arose out of the show cause
notice dated 21.04.2009 wherein the main allegation against the respondent was
as under:-
"2. Whereas on scrutiny of the ST-3 return of Works Contract
Service for the period Oct. 07 March 08, it has been observed that the
notice had paid the service tax in the month of March 1998 @ 20%
instead of 4%. As per Ministry of Finance, Department of Revenue
(Tax Research Unit) F.No. 345/6/2007-TRU dated 28.04.2008, the
service tax shall become chargeable on receipt of payment and on the
amount so received for the service provided or to be provided,
whether or not services are performed. The rate applicable to taxable
transaction shall be the rate in force at the time the service tax
becomes chargeable. This is a well settled legal position. The date on
which the services one record be provided has no relevance to
examine the applicable tax rate the service is already taxable at the
time of revision on rate. In view of the above, it is clarified that the
rate of 4% is applicable for the Works contract service where the
payment for the service is received on or after 01.03.2008."
4. In the present case, it is an admitted position that the service in execution
of Works Contract had been rendered by the respondent during the period
CEAC No23/2013 Page 2 of 4
October 2007 to the end of February 2008. It is also an admitted position that all
invoices in respect of the said services had been raised by the end of February
2008. However, the payments in respect of the said services were received only
after 01.03.2008. It is also an admitted position that rate of service tax applicable
prior to 01.03.2008 was 2% and after 01.03.2008 was 4% under the Works
Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. It is
the case of the appellant that since the payments for the services rendered were
received only after 01.03.2008, the applicable rate would be 4% and not 2%.
Reliance was placed by the revenue on the Ministry of Finance, Department of
Revenue instruction dated 28.04.2008.
5. We may point out at this juncture itself that recently a similar issue had
arisen in another set of cases before us. Those were decided on 23.01.2013 in
W.P.(C) 5636/2010 entitled Vistar Construction Pvt. Ltd. v. Union of India &
Others and W.P.(C) 3632/2012 entitled Piyare Lal Hari Singh Builders Pvt.
Ltd. v. Union of India & Others. In that decision, the main controversy was with
regard to the applicable rate of service tax in respect of works contract service.
There also, the service had been rendered prior to 01.03.2008, but the payments
were received after 01.03.2008. The revenue had placed reliance on the very
same instruction dated 28.04.2008 and, after going through the same, this court
held that the view expressed in the instruction was wrong. This court had placed
reliance on the Supreme Court decision in the case of Association of Leasing &
Financial Service Companies v. Union of India: 2010 (20) STR 417 (SC),
wherein the Supreme Court clearly held that the service tax was levied on service
and that it was not a tax on materials or sale. The taxable event was the rendition
of the service. Consequently, this court held that the rendition of the service had
been completed prior to 01.03.2008 and, therefore, the taxable event had
occurred prior to 01.03.2008. Consequently, the applicable rate of tax would be
CEAC No23/2013 Page 3 of 4
the rate which was prevalent prior to 01.03.2008. Since the entire foundation of
the argument of the revenue is based on the instruction dated 28.04.2008 which
has been found to be invalid by virtue of our decision in the case of Vistar
Construction (supra), the present appeal is also liable to be dismissed.
6. The learned counsel for the appellant, submitted that Rule 3(3) of the
Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007
had not been examined by this court in the case of Vistar Construction (supra)
and, therefore, that decision was distinguishable. First of all, we are not able to
agree with the learned counsel for the appellant inasmuch as the instruction dated
28.04.2008 had been dealt with in detail and the paragraph 2 thereof, specifically
refers to the said Composition Rules of 2007. Secondly, and more importantly,
the show cause notice does not contain any such allegation with regard to the
respondent having made an option under the said Rule 3. Since, there is no
foundational basis for making the submission and no such submission was made
before the appellate authority, the appellant cannot be permitted to take up this
plea before this court for the first time.
7. In view of the foregoing, following the decision in the case of Vistar
Construction (supra,) the present appeal does not raise any substantial questions
of law and is therefore dismissed. There shall be no order as to costs.
BADAR DURREZ AHMED, J
VIBHU BAKHRU, J
MAY 07, 2013
rk/MK
CEAC No23/2013 Page 4 of 4
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