25. [2015-TIOL-2086-CESTAT-DEL] Commissioner of Service Tax, Delhi vs. M/s Bagai Construction.

The taxable event for the levy of service tax is the date of rendition of service. Thus the rate prevalent at the time of provision of service would be the applicable rate irrespective of the rate prevalent at the time of receipt of payment.

Facts:

Assessee paid service tax under works contract service at the rate of 2.06% which was the rate prevalent prior to 01/03/2008 for the payments received after the said date. Although the rate applicable at the time of receipt of payment was 4.12% it was contended that the payments received related to the services rendered prior to 01/03/2008 therefore the old rate should apply.

Held:

Relying on the decision of the Delhi High Court in the case of Vistar Construction P. Ltd vs. Union of India & Ors [2013-TIOL-73-HC-DEL-ST] wherein the Court held that 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 Tribunal decided the matter in favour of the Assessee.

[Note: Readers may note that the issue pertains to the period prior to the introduction of the Point of Taxation Rules, 2011. However, section 67A of the Finance Act, 1994 provides that the rate of service tax, value of taxable service and rate of exchange will be as applicable at the time when the taxable service has been provided or agreed to be provided. Therefore the taxable event being the provision of the service provided or agreed to be provided, the ratio of the aforesaid judgment may be applied.