Tax liability — Relevant date — Rate of tax — Advance payment — Demand for differential tax due to subsequent change of rate of tax — Rate of service tax increased from 8 to 10.2% w.e.f. 10-9-2004 — Appellant received advance payment before 10-9-2004 — Appellant paid tax on full value received — Department did not take any objection to such payment in advance — Held, rate that was applicable at the time of receipt of value of service will apply in a case where the appellant chose to pay tax on

Tax liability — Relevant date — Rate of tax — Advance payment — Demand for differential tax due to subsequent change of rate of tax — Rate of service tax increased from 8 to 10.2% w.e.f. 10-9-2004 — Appellant received advance payment before 10-9-2004 — Appellant paid tax on full value received — Department did not take any objection to such payment in advance — Held, rate that was applicable at the time of receipt of value of service will apply in a case where the appellant chose to pay tax on advance amount received.

The appellant was providing commercial coaching services during the year 2004. The rate of service tax increased from 8 to 10.2% w.e.f. 10-9-2004. The appellant received advance payment before 10-9- 2004 for providing services part of which were provided after 10-9-2004. They paid tax @8%, the rate prevalent at the time of paying service tax on the amounts received by them. The Department did not take any objection to such payment in advance. At a later date, the Department request ed the appellant to deposit the differential service tax on that part of the advance fee collected by them during the period 1-9-2004 to 9-9-2004 against which services were rendered during the period from 10-9-2004 to 31-3-2005. The appellant deposited the differential amount of service tax. The appellant later felt that they need not have paid tax at the higher rate as advised by the Department and they filed a refund claim for the same. The Department rejected the claim.

Held:

It was held that the appellants cannot recover the additional tax amount from their students in view of the fact that the contracts with students were concluded. The appellant paid tax on full value received. The Department did not take any objection to such payment in advance. So at the later date when the rate of service tax increased, there was no reason for the Department to claim that the appellant should not have paid tax in advance. The rate that was at the time of receipt of value of service will apply in case where the appellant chose to pay tax on advance amount received. Comments: The current provisions of Point of Taxation Rules are also in line with the above judgment. Where bill has been raised and payment is also received before change in the rate, the old rate will apply.